The Bank of Canada has long been regarded as a neutral player in central banking. The Canadian central bank’s key interest rate remains below the 2% barrier that the US Federal Reserve Board has decided to stick to for most of its nearly 100 years of existence. The Bank of Canada is considered more interested in making sure financial conditions are conducive to economic growth. That’s an important consideration when growth looks like it’s consistently flat or even falling; especially when other countries like the UK, European Union, and Canada’s NAFTA trading partners are “experiencing” very different challenges. So is the Bank of Canada’s current focus on boosting the economy sustainable? In a recently released report, Bank of Canada economists refer to fiscal stimulus, structural reforms, tax policy, and a strong recovery in commodity prices as tools for economic policy. The report indicates the Bank is in a wait-and-see mode: will economic conditions deteriorate by the time next year’s Monetary Policy Report is released, leaving the bank in no real rush to increase interest rates?
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