During the crisis, the Bank of Canada aggressively cut our policy rate until it reached onequarter of one per cent, the lowest it can effectively go. The Bank then provided extraordinary guidance on the likely path of interest rates necessary to achieve the inflation target in order to maximise the monetary stimulus from its policy rate.
Canada’s inflation-targeting regime was a critical anchor during those turbulent times. It gave the Bank a simple, unwavering goal to guide its policy actions. It provided financial markets and Canadians with a clear means to understand why the Bank did what it did.