Despite being one of Canada’s most prominent and vital institutions, many people are still unaware of how The Bank of Canada affects their lives. This national bank serves many vital societal and economic functions. Arguably, one it’s most important roles is the one in plays in dictating the housing market.
A brief history of The Bank of Canada
Brought to life in 193 via the Bank of Canada act, it was only a few more years before the Bank of Canada was designated a crown corporation. Boasting the Minister of Finance as its largest shareholder, the institution’s role is intricate, but in many respects, singular: to promote the economic well-being of Canada, starting at the Government level and percolating down to citizens.
Under the guidance of a board of directors, the Bank of Canada plays a large role in many facets of Canada’s wealth, currency and daily operations.
Primary responsibilities of The Bank of Canada
As Canada’s national central bank, The Bank of Canada’s principal purpose is “to promote the economic and financial welfare of Canada”. Driven by the legislation in the Bank of Canada Act.
As per their website, The Bank of Canada’s primary responsibilities include:
- Devising monetary policy with the goal of keeping money circulating and inflation as low as possible.
- Promoting a safe and efficient financial system and conducting all financial matters in a way that will support the well-being of Canadians.
- The design, issue, and distribution of currency and all of Canada’s bank notes.
- Acting as the fiscal authority for Canada’s Government. This includes managing its public debt.
Impact of the Housing Market
The Bank of Canada determines the interest rate that most lenders follow. When the rate is low more people apply for mortgages and when it hikes it can cause foreclosures or have an adverse effect on many household incomes.
Recently, the interest rate hike caused a housing market shift in the GTA and created a cooling effect. By no means did it sink the market but it was the first period in a long time that the market showed vulnerability. Again, the Bank of Canada introduced the rate hike due to economic factors and the results are still rippling throughout the country.