The Bank of Canada plays an essential role in promoting and preserving the stability and efficiency of the Canadian financial system. This work helps to sustain economic growth and raise standards of living for Canadians.
In 2023, central banks continued to increase policy interest rates in response to high and persistent inflation. These elevated interest rates, while necessary to reduce inflation, tested the resilience of the global financial system.
In March, for example, banking sectors in the United States and Switzerland faced acute stresses. Authorities in those countries reacted swiftly to limit spillover effects. But these events underscored the need for financial system participants to adapt after more than a decade of low interest rates. These events also served as a reminder that risks can emerge and spread quickly, requiring increased vigilance from regulators and central banks.
Adjusting to higher interest rates and tightened financial conditions
Global financial conditions have tightened considerably because of monetary policy actions to reduce …