I heard three very important questions there, and I'll try to be brief.
First off, the decision of the Federal Reserve last week is positive for Canada in that the stimulus it provided, this form of conditional commitment, is something the bank did in the depths of the crisis. Once we got interest rates as low as they could go, we provided greater certainty to Canadians about where we thought the interest rate path would be in the near future, because there were exceptional circumstances. The Fed is in even more exceptional circumstances, obviously, and the guidance they gave last week had an important impact on interest rates further out on the curve, which is quite stimulative for their economy. I won't be overly precise, because it's not an exact science, but what they did is akin to hundreds of billions in additional quantitative easing, and it has been effective. It's slightly more complicated in that they have a dual mandate, which is a more complicated mandate than ours is.
Let me describe the impact of that in terms of Bank of Canada policy. What matters for the Bank of Canada is what happens in the U.S. economy vis-à-vis the United States. What matters is the impact of what happens in the U.S. economy, taken together with all the other domestic and international factors and their impact on the outlook for inflation in Canada. Then we set monetary policy appropriate for conditions in Canada.
We do not outsource monetary policy to the Federal Reserve, as you know. There have been times in the past when interest rates in Canada have been 200 basis points or more above those in the United States, and there have been times when interest rates in Canada have been 200 basis points or more below the policy rate in the United States. That's because that's what was appropriate to achieve our inflation target.
We will do what's right to achieve that target in Canada. There's no question that what happens in the U.S. matters tremendously for Canada, but the policy stance of the Federal Reserve is not the policy stance of the Bank of Canada, as you know.
Second, personal indebtedness is an important issue. This is a difficult time, period, through this crisis, because in the major global economies we have real economic outlooks and outlooks for prices that are broadly consistent with very low interest rates for a long period of time. That has knock-on effects on the overall level of interest rates, through arbitrage and other factors, here in Canada. We also are facing headwinds in this economy, so we've set interest rates at exceptionally low levels for a period of time, and we will use our policy appropriately in the face of those headwinds to achieve the inflation target. This creates stimulus for those who need it, but it also creates the possibility of people borrowing more than they ultimately will be able to afford to repay.
The responsibility does start with the individual and then goes to the financial institution that is lending them the money. However, as we point out, it is important to remember two things: one, interest rates will not always be at these exceptionally low levels, so think about your ability to service a mortgage, for example, over its full life when interest rates are at more normal levels; two, we don't have aspects of, for example, our mortgage insurance system that excessively encourage this type of behaviour.
As I referenced in my opening statement, the government has taken three series of very prudent and timely measures that are having an impact on excessive borrowing. We're not against borrowing, but there is a time and a place. There needs to be an element of prudence in people's personal affairs and a recognition that while we're in exceptional times, we're not always going to be in exceptional times.