
6 May 2022
Financial Stability and Regulatory Compliance / Macroeconomic Risk / Pandemic Response
Unwinding Pandemic Stimulus: The Bank of Canada’s Narrow Path to Successful Policy Normalization
James K. Stewart, Executive in Residence, Global Risk Institute
Hugh O'Reilly, Executive in Residence, Global Risk Institute
Victoria Guo, Director, Research, Global Risk Institute
Download the Executive Summary - PDF Version
Download the Executive Summary - PDF Version
Unwinding Pandemic Stimulus The Bank of Canada’s Narrow Path to Successful Policy Normalization
Abstract
Canada’s delayed monetary policy shift to contain inflation through significantly higher interest rates faced difficult challenges even before Russia invaded Ukraine. This paper explores issues and risks in the Bank of Canada’s (BoC’s) reactive yet vital policy pivot this spring. It examines lessons from the BoC’s success during COVID-19’s economic crisis and problems from its ultra-easy policy when it continued for too long. The path to success of an economic soft landing through higher policy rates has grown much narrower given the combined inflationary pressures from global growth, supply chain stresses, and the war in Ukraine.
Download and read the Executive Summary >>> Unwinding Pandemic Stimulus The Bank of Canada’s Narrow Path to Successful Policy Normalization Executive Summary
Download and read the Full Report >>> Unwinding Pandemic Stimulus The Bank of Canada’s Narrow Path to Successful Policy Normalization