As such, there is no credit risk attached to sovereign bonds, although they may still carry inflation risk if the central bank is pressured by the government into financing inflationary deficits. In the euro area, however, the same institutional relationships cannot apply.
I will conclude by providing a brief summary of how we apply this framework to today’s circumstances. Canada’s monetary policy regime has proved its worth in both turbulent and tranquil times The effectiveness of Canada’s inflation-targeting regime is well established.