Measuring Interest Rate Expectations in Canada
- Topics:
- Budgeting,
- Reporting and Control
- Tags:
- Asset,
- Interest Rate,
- Financial Market,
- Financial Accounting,
- Financial,
- Finance,
- Business Operations,
- Bank Of Canada,
- Asset Management,
- Operational Planning
- Source:
- Bank of Canada
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Overview: Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.
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Format: PDF | Size: 83KB | Pages: 12
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