Bank of Canada's senior dep gov Caroline Wilkins with a speech just released
- QE an adequate, but not perfect, substitute for monetary policy when policy rate can not go lower
- current inflation-targeting framework is working well
Really?
- clear forward guidance can be an effective tool
Emphasis on "clear" for sure, something that her former boss Mark Carney hasn't quite grasped yet, despite his own belief to the contrary
- negative policy interest rates lessens the need to raise inflation target
- 2% inflation target means 0% policy rate more likely than before
- mon pol must consider risks to fin system, vulnerabilities
- not afraid to change paradigm when needed
- premature to say if negative rates create more demand or not
- with reduced growth potential the neutral state of interest rates is lower than before the global crisis
The speech makes no mention of mon pol or state of economy
Next year the BOC and the federal govt have to renew the bank's 5-year inflation targeting mandate
More from Wilkins, and a research paper to which she refers, here
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