Bank of Canada Governor Stephen Poloz said he dropped the central bank’s language about raising interest rates last week because there is a higher risk of inflation (CACPIYOY) lagging the 2 percent target.
“Inflation has persistently been below target,” Poloz, 58, told lawmakers today during a House of Commons Finance Committee session in Ottawa. “Any negative inflation shock would bring us even further away from target, as opposed to getting closer, and in that context we decided that we should no longer have an explicit bias towards higher interest rates.”
Canada’s dollar reached a seven-week low after his testimony. The currency dropped the most in four months after Poloz’s Oct. 23 decision, when he removed language about higher rates that had been in place for more than a year. Poloz today reiterated that stimulus provided by the 1 percent policy interest rate is “appropriate” given “significant slack” in the world’s 11th-largest economy.
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