OTTAWA (Reuters) – The Bank of Canada’s policy framework is flexible enough to allow the inflation rate to climb back up to the bank’s 2% target more slowly than on average, Governor Stephen Poloz said on Monday.
The comments by Poloz, whose successor Tiff Macklem takes over on June 3, were the second time in less than a week that he has made clear current record low interest rates were unlikely to increase any time soon.
Canada’s annual inflation rate in April turned negative for the first time since 2009, pulled down by the coronavirus pandemic and low oil prices. In a video address to the University of Alberta, Poloz said the bank could let inflation rise “more slowly or quickly than on average”.
He added: “Our policy framework does give us flexibility in the time it takes to get inflation back to target which allows us to make tactical decisions to avoid unintentionally making financial stability concerns worse”.
To underline the fact that inflation might take longer than usual to recover, Poloz noted that the target “sits within a control range of 1% to 3%”. The bank has traditionally said that its target is the midpoint of the 1% to 3% range.
(Reporting by Kelsey Johnson and David Ljunggren, Reuters Ottawa bureau)
