What Does the Bank of Canada Do?
The Board of Directors of the Bank of Canada have retained Odgers Berndtson to seek a new Governor, and have placed an ad in the Globe and Mail, the Economist and La Presse.
The wording of the advertisement is questionable.
First, it states that â€œthe Bank of Canada is the pre-eminent macro-economic institution in Canada.â€
The Bank of Canada is undeniably important, but it has absolutely no role to play in fiscal policy which is entirely the responsibility of the Minister and Department of Finance.
Moreover, the inflation target which anchors monetary policy is set jointly by the Government and the Bank of Canada, meaning that monetary policy is a shared responsibility to a significant degree. The Government appoints the Directors of the Bank, and retains the formal power to issue policy directives.
The ad goes on to state that the Bank is â€œresponsible for the conduct of monetary policy to keep inflation low, stable and predictable, promoting the efficiency of capital markets and the integrity of Canadian currency, while contributing to the development of stronger, more robust domestic and international financial systems.â€
All important stuff, but not a word there about keeping the economy operating at potential, or about employment as a goal of monetary policy.
Lest we forget, the Bank of Canada does have a formal legislated mandate set out in the Bank of Canada Act, namely â€œto regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.â€