Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Promoting Canada’s economic and financial well-being
Remarks to the Chambre de commerce francophone de Saint-Boniface
Winnipeg, Manitoba
16 September 2015
Agathe Côté Deputy Governor
Bank of Canada
Overview
What does the Bank of Canada do?
What is Canada’s economic outlook?
2
Mandate
3
The Bank’s mandate
The mandate of the Bank of Canada is to contribute to the economic well-being of Canadians.
Four key responsibilities:
Monetary policy
Financial system
Currency
Funds management
4
Key responsibilities: Monetary policy
Our objective:
To safeguard confidence in the value of money by keeping inflation low, stable and predictable.
target of 2 per cent established in agreement with the federal government
Benefits:
greater certainty of future buying power
lower interest rates
lower unemployment rate and more-stable economic growth
5
Monetary policy: mission accomplished
6
-2
0
2
4
6
8
10
12
14
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
%
Control Range CPI Inflation target
12-month rate of increase, monthly data
Last observation: July 2015 Sources: Statistics Canada and Bank of Canada calculations
February 1991
Renewal of the inflation-targeting agreement in 2016
The inflation-targeting agreement between
the federal government and the Bank is
renewed every five years.
Three main questions for 2016 renewal:
- Is 2 per cent the optimal level of the inflation target?
- How should monetary policy integrate financial stability considerations?
- Should CPIX continue to be our main guide?
More information at http://www.bankofcanada.ca/core-functions/monetary-policy/renewing-canadas-inflation-control-agreement/
7
The transmission of monetary policy
8
Bank of Canada’s
policy interest
rate
Commercial interest
rates
Asset prices
Exchange rate
Expectations
Inflation at 2%
Demand/Supply balance
Demand Supply
Central bank policy rates at historic lows
9
0
1
2
3
4
5
2008 2009 2010 2011 2012 2013 2014 2015
%
Canada United States Euro area Japan
Policy interest rates, daily data
Last observation: 9 September 2015 Sources : Bank of Canada, U.S. Federal Reserve, European Central Bank and Bank of Japan
Key responsibilities: financial system
Our objective:
To promote the stability and efficiency of the financial system
Canada’s financial system includes
financial institutions
financial markets
clearing and settlement systems
The Bank shares responsibility for financial stability with other regulatory authorities.
10
Principal activities to promote stability of financial system
The Bank
provides liquidity and acts as lender of last resort
oversees systemically important financial market infrastructures and prominent payment systems
contributes to development of policies governing the financial system
assesses vulnerabilities and risks
– publishes findings in the Financial System Review
11
Main vulnerabilities identified in the June Financial System Review
12
100
110
120
130
140
150
160
170
180
2000 2003 2006 2009 2012 2015
%
Debt-to-income ratio
Elevated Household Debt
Last observation: 2015Q2 Sources: Statistics Canada and Bank of Canada calculations
Debt-to-disposable income ratio
-2
0
2
4
6
8
10
12
2012 2013 2014 2015
%
British Columbia and Ontario Alberta and Saskatchewan
Eastern Canada Manitoba
Elevated House Prices 6-month moving average of year-over-year growth in seasonally
adjusted average prices
Last observation: August 2015 Sources: Canadian Real Estate Association and Bank of Canada calculations
a. Eastern Canada consists of all real estate markets in Quebec, Nova Scotia,
New Brunswick, Prince Edward Island, and Newfoundland and Labrador.
a
Key risks identified in the June Financial System Review
13
The Canadian financial system is robust, but can still be subject to important risks, such as
household financial stress and a sharp correction in house prices
a sharp increase in long-term interest rates
stress emanating from China and other emerging-market
economies
financial stress from the euro area
Key responsibilities: currency
Our objective:
To provide Canadians with bank notes they can use with confidence.
Fewer than 30 counterfeits detected annually per million notes in circulation
Polymer notes are secure, durable, innovative and easy to handle.
Demand for bank notes continues to grow at the same rate as the economy.
We have launched a research program on digital currency.
14
15
Counterfeiting has fallen to very low levels
326
221
105 76
45 35 34 28 29 36
< 100
< 50
< 30
0
100
200
300
400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of counterfeit bank notes detected per million notes in circulation*
PPM MTP Target
Parts per million (ppm)
* Target for the 2013–15 medium-term plan is below 30 ppm.
Source: Bank of Canada
MTP target ppm
16
Manage Canada’s foreign exchange reserves and federal government’s cash balances as well as public debt in collaboration with the Department of Finance
Provide the means of final settlement of daily flows of payments among financial institutions
Canada Savings Bonds Program
Our objective: To act as fiscal agent and provide banking services to the federal government and other key players in the financial system
Key responsibilities: funds management
Economic outlook
17
Output across industries is progressing along different tracks
18
98
100
102
104
106
108
2013 2014 2015
Index
3-month moving average; index: January 2013 = 100
Last observation: June 2015 Sources: Statistics Canada and Bank of Canada calculations
Note: The oil and gas industries include the extraction, support activities and engineering construction sectors. The non-energy commodities industries exclude printing and food manufacturing.
Oil and gas Non-energy commodities Rest of the economy
83 per cent of GDP
9 per cent of GDP
8 per cent of GDP
20
40
60
80
100
120
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep
US$/barrel
WCS crude oilᵃ WTI crude oilᵇ Brent crude oil
Daily data
Last observation: 9 September 2015 Source: Bank of Canada
a. WCS refers to Western Canada Select.
b. WTI refers to West Texas Intermediate.
Oil prices remain low
19
2014 2015
Prices of base metals have continued to weaken
20
70
100
130
160
2010 2011 2012 2013 2014 2015
Index
Base metals Forestry products Agricultural products
Index: January 2010 = 100
Last observation: September 2015
Source: Bank of Canada
Note: The value for September 2015 is the average of daily data up to 7 September.
The sharp drop in oil prices has reduced real gross domestic income
21
-10
-8
-6
-4
-2
0
2
4
6
2011 2012 2013 2014 2015
%
Terms of trade Real gross domestic income (GDI) Real GDP
Year-over-year percentage change at an annual rate, quarterly data
Last observation: 2015Q2 Source: Statistics Canada
The current level of the Canadian dollar is consistent with its historical relationship with oil prices
22
0
100
200
300
400
500
600
80
100
120
140
160
180
200
2000 2002 2004 2006 2008 2010 2012 2014 2016
Index Index
Can$ vis-à-vis US$ (left scale) Crude oil index (right scale)
Index: January 2000 = 100
Last observation: August 2015
Source: Bank of Canada
Note: The crude oil index is a subindex of the Bank of Canada Commodity Price Index (BCPI) that is composed of prices for West Texas
Intermediate, Western Canada Select and Brent crude oil.
U.S. economic activity is expected to accelerate
23
0
1
2
3
4
5
6
2013 2014 2015 2016 2017
%
Bank of Canada's foreign activity measure U.S. real GDP Forecast Forecast
Year-over-year percentage change
Last observation: Last data plotted: 2017 Sources: U.S. Bureau of Economic Analysis and Bank of Canada projections, Monetary Policy Report, July 2015
Export sectors more sensitive to the exchange rate have regained momentum
24
95
100
105
110
115
120
125
2013 2013 2013 2014 2014 2014 2015 2015
Index
More sensitive to exchange rate Less sensitive to exchange rate
3-month moving average; index: January 2013 = 100
Last observation: July 2015 Sources: Statistics Canada and Bank of Canada calculations
After contracting in the first half of 2015, economic activity is expected to recover
25
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-4
-3
-2
-1
0
1
2
3
4
5
6
7
2010 2011 2012 2013 2014 2015 2016 2017
Percentage points %
Business fixed investment (right scale) Net exports (right scale)
Other components of GDP (right scale) GDP growth, at annual rates (left scale)
Contributions to real GDP growth; 4-quarter moving average
Sources: Statistics Canada and Bank of Canada projections, Monetary Policy Report, July 2015
Private forecasters expect Manitoba’s economic growth to exceed Canada’s in 2015 and 2016
26
-4
-3
-2
-1
0
1
2
3
4
2009 2010 2011 2012 2013 2014p 2015f 2016f
Canada Manitoba
Annual Percentage Change of Real GDP
Last data plotted: 2016
Sources: Statistics Canada, Conference Board of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal, Royal
Bank of Canada and Bank of Canada calculations
Note: Projections are an average of private sector estimates. p = preliminary, f = forecast
%
Inflation is expected to return sustainably to 2 per cent in the first half of 2017
27
-1
0
1
2
3
4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
%
Control range Total CPI Core CPIᵃ Target
Year-over-year percentage change, quarterly data
Sources: Statistics Canada and Bank of Canada calculations and projections Monetary Policy Report, July 2015
a.CPI excluding eight of the most volatile components and the effect of changes in indirect taxes on the remaining components