The Bank of Canada chooses to influence interest rates directly rather than influencing the money supply directly because

Question

Quizplus · Accepted Answer

The Bank of Canada, like many central banks, prefers to influence interest rates directly for several reasons: it does not require precise knowledge of the money demand curve's position or slope, the deposit creation mechanism is not fully controllable by the central bank, and setting the interest rate is a more straightforward way to communicate policy actions to the public.

The Bank of Canada Chooses to Influence Interest Rates Directly