like funds and investment funds. we should remove the ambiguity of intermediate descriptions such as low volatility funds. third, and to support removing the ambiguity, it will be important to define in an accounting and substantive sense more explicitly what constitutes cash - like. current guidance leaves a lot of judgement to managers and auditors to make these decisions on a fund by fund basis1. money - market funds are a cash management instrument, so it may seem odd that the meaning of cash - like as a term has not been well defined. the resultant ambiguity may have seemed convenient as a means to stretch the boundary of the definition to allow less liquid instruments in, but when a stress event like the dash for cash happens, the flaw is badly exposed and financial stability is in jeopardy. the authorities then have to intervene in scale to restore well - functioning markets, but that should not be the accepted way to run the system. 4 / 6 bis central bankers'speeches that said, the definition of cash - like therefore needs to be clear and appropriate rather than overprescriptive. for many purposes it does need to provide near instant access to cash – i. e. quick redemption of a holding in a money market fund should be assured. but there are situations where, say, holding a three month tenor instrument is appropriate because it satisfies treasury management objectives. the critical need is to avoid ambiguity of definition and mismatches between an instrument ’ s liquidity and its use. funds that do not meet this requirement should be clearly labelled and treated as part of the investment fund world, serving a different purpose ( where there are also issues, but these are not my focus today ). you may well say “ he really is labouring this point ”. yes i am, because the post financial crisis reforms did not tackle it conclusively. so, what reforms are required to establish money market funds as cash - like without ambiguity? the first thing to say is that no single reform will solve things on its own. we must identify a coherent package of reforms that address the current vulnerabilities in the money market fund sector. it is easiest to describe three broad approaches to illustrate the potential options available that could deliver this objective. these are intentionally somewhat stylistic, to draw out the tradeoffs we face in addressing these issues. first, at one extreme, asset holdings could be limited to government instruments. given the low risk and liquid nature of these instruments, run risk would be materially reduced. the existing

stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 15 april 2020. * * * good morning. senior deputy governor wilkins and i are glad to have the opportunity to answer your questions about today ’ s policy announcement and monetary policy report ( mpr ). allow me to begin with a few comments. the canadian economy is experiencing a significant and rapid contraction. the shock is a global one, affecting all countries, but commodity - producing countries like canada are being hit twice. in the very near term, policy - makers can do little more than cushion the blow. it is worth spending a moment to emphasize why the central bank ’ s inflation targets matter so much, even at a time such as this. inflation targets were put in place around the world when the dominant worry was higher inflation. today, the situation is very complex. however, governing council agreed that the balance of forces points to weaker demand and a decline in inflation as the dominant concern. inflation targets provide an anchor for the economy — particularly inflation expectations — and a guide for policy actions equally in today ’ s situation. keeping inflation close to target means taking measures to ensure that the economy stabilizes and then returns to full capacity. failing to do so now would mean that inflation would persistently fall short of target. if inflation were to fall short of target for an extended period, faith in that anchor would be eroded, and policy - makers would face even greater challenges in returning the economy to full capacity. this challenge can become particularly acute should inflation fall persistently below zero. subzero inflation, or deflation, would interact with existing indebtedness in a particularly undesirable way. specifically, negative inflation would increase the real value of outstanding debts while it would erode the ability of companies and households to service their debt — a very difficult mix for the financial system. fortunately, the risk of sustained deflation in canada is low, for several reasons. first, there has been a vigorous and elastic response from governments to the pandemic. these actions will put a floor under the economy and lay the foundation for the subsequent recovery. this is especially true for wage subsidies, which are designed to maintain the employee - employer relationship, thereby buttressing confidence and facilitating the recovery. second, canada began the pandemic episode with the economy operating near potential