Bank of Canada (BoC) Governor Stephen Poloz disclosed that he has abandoned any bias for higher interest rates, saying officials are focusing on keeping the policy aligned with current economic conditions.
When asked at a Washington press briefing on Saturday whether he’s done with hiking rates, Poloz said: “That’s a very data-dependent question.” He also dismissed the idea that BoC has any specific target for borrowing costs, even though policymakers estimate interest rates would probably need to be higher were the economy not facing headwinds.
“What matters is what forces are acting in the economy,” and what level of interest rates will bring the economy into balance, said Poloz, who attended meetings of the International Monetary Fund. “That number is going to change every time something hits the economy, whether it’s a positive thing or a negative thing.”
The comments are consistent with BoC’s recent efforts to walk back previous statements about the need to raise rates. Over the past six weeks, Poloz and his officials have highlighted the need for continued stimulus amid a slowing economy and downplayed the notion that they have a precise understanding of where rates would need to settle even if headwinds dissipate, according to a Bloomberg report.
Poloz said that estimates of how high rates will need to go are theoretical, and the actual neutral rate is unknown. Regardless, headwinds exist and require the policy rate to remain stimulative.
At the latest rate decision on March 6, “we said pretty clearly, conditions warrant a rate of interest below neutral,” Poloz said. “So it’s obvious that we’re still working on some headwinds or things that are keeping the economy getting all the way home. That’s as far as I can go at this stage.”