The Bank of Canada is considering changes to the framework that has underpinned its policy decisions, like interest-rate movements. Senior deputy governor Carolyn Wilkins said the current inflation-targeting approach has improved economic well-being, but after the post-financial-crisis, she said there are also consequences to the bank’s mandate of helping inflation stay close to its overnight rate target of 2%. “Even a well-functioning monetary-policy framework deserves an open-minded discussion,” Wilkins said. “There are a couple of challenges facing our framework that mean it may not serve the economic welfare of Canada in the future as well as it has.” A key issue is that interest rates are no longer expected to rise as high as they had before the crisis, translating to less room for the bank to cut rates in an economic downturn. Furthermore, lower rates may entice Canadians and investors to become more risk-averse — leaving the economy exposed to the fluctuations of business cycles. Long-running low-rate conditions have also encouraged Canadian households to amass record levels of debt. To eliminate these problems, the Bank of Canada is researching frameworks like a higher target for inflation and a more flexible, dual mandate that would extend the bank’s focus to also incorporate labour and other economic indicators. The bank will also look at diversifying its options of “unconventional” monetary policy tools, such as providing explicit guidance for the markets ahead of rate decisions and introducing negative interest rates.