Those who established the Bank of Canada in the wake of the Great Depression clearly understood that the two goals of financial andeconomic stability must go hand-in-hand. One is a necessary condition for the other. But the experience of history tells us that economic stability, supported by the appropriate monetary policy to achieve low and stable inflation, is not sufficient for financial stability.
That was an important lesson taught by the global financial crises of the late 1920s and 2000s. Other policies are needed to help to safeguard financial stability, namely, effective regulation and supervision of the financial system, and close monitoring and timely remediation of emerging financial vulnerabilities. The Bank of Canada makes important contributions to these other means of achieving financial stability.