The Bank of Canada (BoC) is the country’s central bank. Its mission is to maintain economic stability in Canada. Activities include setting the interest rate, creating the national currency, managing funds and supervising retail payments. The FortRoddHill experts have prepared a detailed overview of the bank’s history.
Bank of Canada Brief Review
The Canadian Central Bank was founded in 1935 under a separate Act signed in 1934. Its head office is located in Ottawa. At the beginning of 2024, the bank had more than 2,350 employees. From 2020 until now, the BoC governor is Tiff Macklem.
| Industry | Founded | Founder | Country | Headquarters | Chief Executive Officer (CEO) | Employees |
| Financial industry | 1935 | R.B. Bennett | Canada | Bank of Canada Building, 234 Wellington Street in Ottawa, Ontario | Tiff Macklem | 2,350+ |
Overview of the Bank of Canada’s History
The Bank of Canada is a government institution that serves as the country’s primary financial regulator. It opened its doors for the first time in 1935. The bank was created to settle international accounts and replace the other currencies with the Canadian dollar. Since then, its functions have grown considerably — now, they even include researching the impact of digital currencies on the country’s economy.
But how was the bank founded, and what is its growth story? The FortRoddHill team will tell you about this below.
1935 (The Creation of the Bank of Canada)
The first prerequisites for the establishment of the National Bank of Canada started in 1929. The reason was the onset of the Great Depression. Increased unemployment and the collapse of financial institutions led to people’s disillusionment with the country’s economic system. Private banks, which did not depend on the decisions of the central authorities, became an unexpected problem. They could perform any action, which also negatively impacted the mood of Canadians who were not confident in the future. All these reasons have led to a wave of criticism that the government and banking system have been subjected to.
The Then-Prime Minister, R.B. Bennett, understood the danger of an unstable economic system during the crisis. He also remembered that discussions about the need for a central bank in Canada had been ongoing since the early 19th century. These factors prompted Bennett to create a commission to make an unequivocal judgment on the need for this institution. The answer was affirmative, and a week after receiving the report, Prime Minister Bennett announced that his parliament was ready to follow the recommendations, allowing him to be considered the bank’s founder.
1934 was the year the BoC was created under the separate Act. It began its financial operations in 1935, and its interest rate was 2.5%. The government intended the bank to be a private institution at first, but it later changed its mind. The nationalization occurred in 1938.
Graham Towers, an ex-management executive at the Royal Bank of Canada, was the first BoC governor. He held the position until 1954.
1935-1970 (The Great Depression, Second World War, Post-War Period)
During World War II, Canada’s economy was at its peak. The reason was that the country was actively supplying the Allies with all kinds of resources. The government increased the money supply in the financial system through the Bank of Canada. Thanks to this support, the interest rate was lowered, encouraging people and businesses to borrow money from the BoC to invest in new manufacturing plants and housing.
The interest rate remained at 1.5% until 1955, increasing investment in the Canadian economy. However, in the mid-1950s, a conflict arose between the BoC and the federal government over how to control inflation. The Bank’s management believed it was appropriate to tighten credit conditions, while the government thought it would be better to increase the money supply to reduce unemployment. At this time, James Coyne became the governor of the BoC. He chose to fight inflation by increasing the interest rate. After a conflict with the government that lasted 6 years, Coyne resigned.
In 1961, Louis Rasminsky became the governor of the Bank of Canada. He successfully settled the dispute with the government through negotiations. In 1967, the Bank of Canada Act was amended. The amendments confirmed the Bank’s control over day-to-day monetary policy and stated that the government sets its overall objectives.
1970-1991 (Stagflation)
The interest rate continued to rise. Attempts to maintain a fixed rate with the USD did not produce the expected positive results, and in October 1978, the rate became double digits for the first time, locking at 10.25%. It was preceded by the Bank Governor’s announcement that he would introduce a new policy of targeted money supply growth to manage inflation better. This supply became more difficult after chartered banks, such as the Royal Bank of Canada, introduced new banking innovations that increased the turnover of money spent in the economy (called the velocity of money). In 1981, the highest historical interest rate was recorded. It was 20.03%.
As a result, in 1982, the BoC announced that it would abandon money supply growth targets and move to interest rate control to fight inflation. John Crow, who became governor in 1987, established that the first long-term goal of monetary management would be price stability, which would be achieved by controlling interest rates. Consequently, the Bank decided to begin setting inflation targets as its main policy objective. The primary target was 3%, which was to fall to 2% by the decade’s end.
1991-Present (Economic Recovery and New Technologies)
The Canadian economy faced many challenges during the 1990s. Inflation spiked, and unemployment reached record highs. The Board of Directors and the government attempted to improve the situation. They chose inflation control as their primary objective, and they achieved this goal by raising the interest rate. The Bank of Canada published a contingency plan for similar crises the same year. At the same time, it started introducing electronic payment systems and ATMs, which simplified financial transactions for both individual users and businesses.
The 2000s marked the development of digital banking. Customers could now conduct transactions via the Internet. To keep up with the times, the BoC updated its website. On the new platform, anyone could view statistical data and economic reports. The introduction of new technologies continued in the 2010s. One of the BoC’s significant achievements was its involvement in developing Interac, a payment system that people across Canada now use to make payments.
During the difficult period of the COVID-19 pandemic, the Bank worked hard to support the Canadian economy. It created the softest possible environment for investors and lowered the interest rate to record lows.
The BoC is now actively using AI for risk forecasting and economic modelling. It also explores blockchain technology and promotes the introduction of the Canadian digital dollar (e-looney).
The Interest Rates History at the Canadian Central Bank
The Bank of Canada’s interest rate constantly changed as governors responded to the challenges presented by economic events. The FortRoddHill team has collected the data, analyzed it, and presented the most important changes in a tabular format. We have also compiled a history of changes over the last 10 years.
| Year | Interest Rate |
| 1935 | 2.5% |
| 1950 | 1.5% |
| 1955 | 2% |
| 1978 | 10.25% |
| 1981 | 20.03% |
| 2009 | 0.5% |
| 2014 | 1% |
| 2015 | 0.5% |
| 2016 | 0.5% |
| 2017 | 1% |
| 2018 | 1.75% |
| 2019 | 1.75% |
| 2020 | 0.25% |
| 2021 | 0.25% |
| 2022 | 5% |
| 2023 | 5% |
| 2024 | 3.25% |
Bank Of Canada Exchange Rate History
The exchange rate of Canadian dollars against the U.S. dollar has also fluctuated. The lowest rate was recorded in 1974 (0.9780), and the highest was in 2002 (1.0754). We have prepared a table with exchange rate changes, breaking down the data into five-year periods, and added current data for December 2024.
| Year | Exchange Rate |
| 1971 | 1.0099 |
| 1976 | 0.9863 |
| 1981 | 1.1990 |
| 1986 | 1.3896 |
| 1991 | 1.1460 |
| 1996 | 1.3638 |
| 2001 | 1.5487 |
| 2006 | 1.1340 |
| 2011 | 0.9887 |
| 2016 | 1.3243 |
| 2021 | 1.2533 |
| 2023 | 1.3494 |
| December 2024 | 1.3975 |
List of BoC Governors in History
The history of the Bank of Canada includes 10 governors. All of these people have significantly contributed to the BoC’s development.
| Governor | Term |
| Graham Towers | 1934-1954 |
| James Coyne | 1955-1961 |
| Louis Rasminsky | 1961-1973 |
| Gerald Bouey | 1973-1987 |
| John Crow | 1987-1994 |
| Gordon Thiessen | 1994-2001 |
| David Dodge | 2001-2008 |
| Mark Carney | 2008-2013 |
| Stephen S. Poloz | 2013-2020 |
| Tiff Macklem | 2020-Present |
Summary
The FortRoddHill team analyzed all the key milestones the Bank of Canada has gone through in its history. In 90 years, it has had its ups and downs. The Bank was created to stabilize the situation during the Great Depression, and its functions have grown significantly over time. It now implements monetary policy, monitors the financial system, and manages money payments.
Thanks to wise management and collaboration with the government, the Bank of Canada stabilized the country’s financial situation even during peak crisis periods. The BoC’s primary goal now is to ensure the economic well-being of Canada and its people.