Video - Monetary policy, a key consideration!

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June 2017 - Monetary policy, a key consideration! with our expert Jean-René Ouellet

SUBJECT : Monetary policy

EXPERTS : Jean-René Ouellet

VERSION: English

Note: The information in brackets "[...]" describes the visual and audio content of the video other than the dialogue or the narration.

[Jinggle music begins. The title ‘’Market Trends’’ appears in a honeycomb cell, then replaced by the video’s title: Monetary policy, a key consideration! – June 2017. It all gives way to the Desjardins Securities logo.  These images give way to Mr. Jean-René Ouellet in an office. Behind him, we can see computer screens with stock quotes].

Jean-René Ouellet (MBA, CFA, Portfolio Manager, Portfolio Advisory Group)

On May 24, the Bank of Canada kept its key interest rate at 0.5%. To understand the strategy behind this decision, it must be understood that every day, households, businesses and investors make decisions that are directly influenced by monetary policy.

For example, a young couple getting ready to buy their first home will consider the mortgage interest rate. The business contemplating an investment in a new plant or assembly line including robotics, artificial intelligence and digital information will base its decision on the economic and financial outlook.

At the heart of these decisions is the Bank of Canada whose mandate is to maintain the value of the currency by keeping inflation low, stable and predictable. This allows Canadians to make more confident spending and investment choices, promotes long-term investment in the country’s economy, and contributes to sustained job creation and increased productivity, all necessary ingredients for improving our standard of living.

The Canadian monetary policy framework is based on two main components: the inflation control target and the floating exchange rate. This framework makes it easier for Canadians to understand monetary policy measures.

It is important to remember that the Bank of Canada considers the degree of monetary easing in place to be appropriate for now, which is why it kept its key interest rate at 0.5% on May 24. This is a strategic decision for economic growth, job creation, consumption, business investment and residential construction.

Not counting its effect on the Canadian dollar and exports. And now that its key interest rate remains unchanged, the Bank of Canada is giving leeway in debt management to households and governments as well as exports in a context where the U.S. Federal Reserve is currently promoting a reduction in the degree of monetary easing. The growing gap between Canadian and U.S. key interest rates and a lower Canadian dollar would make exports more competitive.

In the end, monetary policy or rather its governance is at the heart of Canadian consumer and investment decisions. A force to be reckoned with!

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