1 They focused on many questions posed by low inflation and, in particular, on what unconventional tools a central bank might use to support the economy if interest rates fell to what we now call the effective lower bound (ELB). Even though the Bank of Japan was grappling with the ELB as the conference met, the issue seemed remote for the United States.
In response, Canadian banks raised significant additional, high-quality capital from private sources. The recent improvement in market sentiment has been reinforced by the release in May of the stress-test results for the 19 largest U.S. banks.