Strengthening the framework to manage the potential risks these developments pose to the Canadian economy is the key objective of our research over the next four years. The search for an anchor Monetary policy needs a nominal anchor or a fixed point of reference to help tie down the expectations people have about inflation.
During the 1960s, that anchor in most countries was a pegged nominal exchange rate that linked the value of domestic currencies to the US dollar. 1 This exchange rate arrangement, known as the Bretton Woods system, collapsed in the early 1970s, largely because of unsustainable inflationary pressure in the United States.