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The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]

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In these excerpts from a presentation to a conference in Toronto, Deputy Governor Charles Freedman analyses the way in which the monetary conditions index (MCI) enters into the Bank's thinking and actions. He describes how the Bank works in the context of a forward-looking assessment of economic developments and inflationary pressures to decide upon a desired path for the MCI that will result in a rate of inflation, six to eight quarters ahead, that is within the Bank's target band. Mr. Freedman also uses specific examples to explain how various shocks to the economy can change the Bank's desired path for monetary conditions. He describes the role that tactical considerations relating to market circumstances play regarding the timing of Bank actions to bring monetary conditions onto the desired path and emphasizes the need to give precedence to steadying nervous markets.

Suggested Citation

  • Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
  • Handle: RePEc:bca:bcarev:v:1995:y:1995:i:autumn95:p:53-59
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    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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