“Going Direct”

While at the reason is that the symmetry in conducting monetary lower bound the trade-offs between output and policy is no longer a given when the overnight rate inflation are muted, and direct transfers may offer is close to its lower bound.3 The new normal for the some additional power to achieve the inflation Canadian overnight rate since the Great Recession target, the existing tools can mimic [...] This increases the asset side of the balance sheet, and leads to a credit for the deposits of such institutions on the liability side of the balance sheet. [...] Of course, the Bank is not of who decides and how these transfers were made truly independent, in the sense that (i) its mandate – the government would explicitly issue debt to the can be revoked by the government per directive; Bank of Canada, unlike quantitative easing, in which (ii) the governor and the senior deputy governor the Bank buys this debt in secondary markets.11 are appointed formall [...] Importantly, without a change in the Bank’s mandate, this would imply We now look at guiding principles for implementing that the stimulus must help to bring inflation back “going direct” in Canada in the context of the Bank within the range of the inflation target within the of Canada’s inflation-targeting framework. [...] The former is closer to the tradition of monetary policy in that the Bank of Canada Our proposed guidelines for “going direct” are has a clear objective – price stability – that affects meant to minimize political interference, but they the asset values of all Canadians, and has complex leave open a wide range of design options for the non-trivial implications for the distribution of Bank of Canad