The policy rate has declined because of a decrease in the equilibrium real interest rate, which has occurred as lower potential output growth has reduced the demand for investment. For further details, see R. Mendes, “The Neutral Rate of Interest in Canada,” Bank of Canada Staff Discussion Paper No. 2014-5 (September 2014).
xvi During 2009 and 2010, when the policy rate was at 0.25 per cent, the Bank of Canada employed conditional forward guidance about the likely path for interest rates to provide additional monetary stimulus. Large-scale asset purchases were not conducted in Canada.