The Bank of Canada (BoC; French: Banque du Canada) is a Crown corporation and Canada's central bank.Chartered in 1934 under the Bank of Canada Act, it is responsible for formulating Canada's monetary policy, and for the promotion of a safe and sound financial system within Canada. The Bank of Canada is the sole issuing authority of Canadian banknotes, provides banking services and money management for the government, and loans money to Canadian financial institutions. The contract to produce the banknotes has been held by the Canadian Bank Note Company since 1935.
The Bank of Canada headquarters are located at the Bank of Canada Building, 234 Wellington Street in Ottawa, Ontario. The building also used to house the Bank of Canada Museum, which opened in December 1980 and temporarily closed in 2013. As of July 2017, the museum is now located at 30 Bank Street, Ottawa, Ontario, but is connected to the main buildings through the Bank of Canada's underground meeting rooms
Prior to the creation of the Bank of Canada, The Bank of Montreal, then the nation's largest bank, acted as the government's banker, and the federal Department of Finance was responsible for printing Canada's banknotes.
In 1933, Prime Minister R.B. Bennett instituted the Royal Commission on Banking and Currency and it reported its policy recommendations in favour of the establishment of a central bank for Canada. The Royal Commission's members consisted of Scottish jurist Lord Macmillan, Bank of England director Sir Charles Addis, Canadian former Finance Minister William Thomas White, Banque Canadienne de Montreal general manager Beaudry Leman, and Premier of Alberta John Edward Brownlee.
The bank was chartered by and under the Bank of Canada Act on 3 July 1934, as a privately owned corporation, a move taken in order to ensure the bank would be free from partisan political influence. The Bank's purpose was set out in the preamble to the act: "to 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 the Dominion". With the exception of the word "Canada" replacing "the Dominion", the wording today is identical to the 1934 legislation. On 11 March 1935, the Bank of Canada began operations, following the granting of Royal Assent to the Bank of Canada Act.
In 1938, under Prime Minister William Lyon Mackenzie King, the bank was legally designated a federal Crown corporation. The minister of finance holds the entire share capital issued by the bank. "The capital shall be divided into one hundred thousand shares of the par value of fifty dollars each, which shall be issued to the Minister to be held by the Minister on behalf of Her Majesty in right of Canada." No changes were made in the purpose of the Bank.
The government appointed a board of directors to manage the bank, under the leadership of a governor. Each director swore an oath of "fidelity and secrecy" before taking office.
In 1944, the Bank of Canada then became the sole issuer of legal tender banknotes in and under Canada
During World War II, the Bank of Canada operated the Foreign Exchange Control Board and the War Finance Committee, which raised funds through Victory Bonds. After the war, the bank's role was expanded as it was mandated to encourage economic growth in Canada. An Act of Parliament in September 1944 established the subsidiary Business Development Bank of Canada (BDC) to stimulate investment in Canadian businesses. Prime Minister John Diefenbaker's central-bank monetary policy was directed towards increasing the money supply to generate low interest rates, and incentivize full employment. When inflation began to rise in the early 1960s, then-Governor James Coyne ordered a reduction in the Canadian money supply.
Since the 1980s, the main priority of the Bank of Canada has been keeping inflation low. As part of that strategy, interest rates were kept at a low level for almost seven years in the 1990s. Since September 2010, the key interest rate (overnight rate) was 0.5%.
Between 2013 and early 2017, the Bank of Canada temporarily moved its offices to 234 Laurier Street in Ottawa to allow major renovations to its headquarters building.
In mid 2017, inflation remained below the Bank's 2% target, (at 1.6%), mostly because of reductions in the cost of energy, food and automobiles; as well, the economy was in a continuing spurt with a predicted GDP growth of 2.8 percent by year end. On 12 July 2017, the bank issued a statement that the benchmark rate would be increased to 0.75%. "The economy can handle very well this move we have today and of course you need to preface that with an acknowledgment that of course interest rates are still very low," Governor Stephen Poloz subsequently said. In its press release, the bank had confirmed that the rate would continue to be evaluated at least partly on the basis of inflation. "Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the bank's inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities." Poloz refused to speculate on the future of the economy but said, "I don't doubt that interest rates will move higher, but there's no predetermined path in mind at this stage
