The Bank of Canada raises the target for the overnight rate by a quarter of a percentage point to 4%.

OTTAWA The Bank of Canada announced today that it is raising the target for the overnight rate by a quarter of a percentage point to 4%. It also increases the limits of the operating range for this rate by a quarter of a point [...].

The global economy is growing at a healthy pace, showing slightly more momentum than expected. This boom and the accompanying rise in many commodity prices, combined with strong domestic demand in Canada, have enabled the country's economy to record a robust rate of expansion, in line with the outlook set out by the Bank in the January Monetary Policy Report Update. At the same time, global competition and the past appreciation of the Canadian dollar continue to pose challenges for several sectors. All things considered, the Bank believes that the Canadian economy is operating at a level [...] equal to its productive capacity. High energy prices kept the rate of increase in the headline CPI in Canada slightly above the Bank's target. However, core inflation remained below 2% due to persistent downward pressure from the prices of imported consumer goods. Under these circumstances, the Bank has decided to increase the target for the overnight rate. [...]

In light of this outlook, the Bank estimates that it may need to raise the policy rate somewhat further in order to maintain the balance between aggregate supply and demand and to keep inflation at the target rate over the medium term [. ..].

Referring to the following statement, answer questions 8 to 12.

The press release concludes that:

"In light of this outlook [for the future], the Bank believes that it may need to raise the policy rate somewhat further [...]".

Issue 1:

Explain what the Bank of Canada fears that would justify it having to "raise the policy rate somewhat further". be precise

Issue 2:

What other action does the Bank of Canada have to achieve the same result? Explain.

Issue 3:

What are these types of Bank of Canada shares called?

Please choose an answer.

a. Restrictive monetary policies

b. Expansionary fiscal policies

c. Expansionary monetary policies

d. Restrictive fiscal policies

Issue 4:

Explain step by step what would happen to the Canadian economy if the Bank of Canada decides to implement (i.e. enforce) this policy

Issue 5:

Explain what would happen if the Bank of Canada did not act, that is, if it did not raise the policy rate "somewhat more".