The Exchange Rate and Canadian Inflation Targeting
* An essential part of the Bank of Canada's inflation-control strategy is a flexible exchange rate that is free to adjust to various developments in the Canadian and world economies. The Bank of Canada does not set a target for the exchange rate.
* A change in the Bank's target for the overnight
* When the exchange rate changes for reasons unrelated to a change in domestic monetary policy, the cause of the change must be identified in order to determine the appropriate monetary policy action. A central challenge for the Bank is to determine the cause and persistence of the change in the exchange rate and the likely net effect on aggregate demand. The Bank can then design the appropriate policy action consistent with its objective of keeping inflation low, stable, and predictable.
In addition, make sure to read these articles:
- What Fed Rates Mean for You
- Traveling Overseas? Get the Skinny on Currency Exchange
- Credit Crunch Sweeps Main Street Like a Pernicious Virus
- Adjusting to a Changing Economic World
- Recent economic developments and the conduct of monetary policy
- Inflation, Unemployment and Monetary Policy
- The Americas: Canadian dollar turns suddenly popular
- Information and analysis for monetary policy: Coming to a decision
- Models in policy-making
- A proposal for monetary reform
- The Bank of Canada's contribution to the economic well-being of Canadians
- Communicating Canadian monetary policy: Towards greater transparency
- Monetary policy in a dynamic, global environment.
- The Bank of Canada and monetary policy: Future directions
- The Effect of Monetary Policy on Real Exchange Rate Misalignment.
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