- The Bank of Canada’s Governor Stephen Poloz focused on integrating financial stability concerns in to monetary policy
- He showed concern over other central banks policy actions toward financial instability as it arises
- The Bank of Canada is not entertaining a whole new regime, said Poloz, keeping inflation targeting as the primary objective
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The Bank of Canada’s Governor Stephen S. Poloz gave a speech today in Lima, Peru at the annual gathering of the World Bank and International Monetary Fund. His focus was on the Bank of Canada (BoC) integrating financial stability concerns into monetary policy, stating that the Bank is taking a risk-management approach to the integration. He went on to say that financial stability issues add a new dimension of risk to the many uncertainties that are already present in the conduct of monetary policy. That said, he emphasized his belief that monetary policy should be the last line of defense against financial stability concerns, not the first.
A hesitant tone was offered by Poloz towards other major central banks adjusting policy to try to lean against every emerging financial imbalance. He stated that the BoC’s flexible framework gives it the option of taking more time to return inflation to the target to not worsen financial stability concerns. He said that financial stability risks are subordinate to its inflation goal.
Poloz said that the BoC is not entertaining a whole new regime and that there is a high bar for any change to the 2 percent inflation target. From his perspective, the global economic picture remains ‘encouraging’ with the emerging markets well prepared for a US rate hike.