ECO105Y1 Lecture Notes - Lecture 19: Phillips Curve, Government Failure, Quantitative Easing
Document Summary
The bank of canada changes the money supply and interest rates, aiming for an inflation control target that ach ieves steady growth, full employment, and stable prices. Bank of canada is responsible for monetary policy adjusting the supply of money and interest rates to achieve steady growth, full employment, and price stability. Price stability means inflation rate is low enough to not significantly affects peo ples" decisions. Inflation-control target range of inflation rates set by a central bank as a monetary policy objective. Bank of canada"s target is an annual inflation rate of 1 to 3 perce nt as measured by the cpi. Bank of canada uses core cpi as an operational guide about underlyin g inflation trends. The bank of canada uses open market operations to change interest ra tes. Buying bonds increases the money supply and raises bond prices, lowering interest rates. Selling bonds decreases the money supply an d lowers bond prices, raising interest rates.
