EC140 Lecture : chapter 30.doc
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EC140 Full Course Notes
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12:59 pm: objective of monetary policy is to control quantity of money and interest rates to avoid inflation. Prevent excessive swings in real gdp growth and unemployment: bank of canada conducts monetary policy- an arms-length organization. Not a government department, but is owned by them. Minister of finance can still order bank of canada to change policy. Alters interest rates and money supply to keep inflation in given. Inflation is kept in band between 1-3% a year. Recently, bank of canada has signalled it will depart from this. Bank of canada operates inflation rate targeting policy range. Inflation target uses cpi as measure of inflation guide) inflation trend and better predicts future cpi inflation. Actual inflation rate sometimes falls out of accpetable range (very fast. Bank also pays close attention to core inflation (operational. Bank believes core inflation is better measure of underlying o o o o recessions of expansions)
