Poloz says BoC could cut rates below zero, if needed

FXStreet (Córdoba) - BoC Governor Stephen Poloz said the bank lowered its effective lower bound for Canada’s policy rate to around -0.5%. He said the BoC could adopt negative rates in the case of adverse shocks, but added such a move isn't now under consideration.

His speech was meant to highlight the unconventional policy tools available to deploy including: offering forward guidance to financial markets to enhance policy effectiveness, large-scale asset purchases, funding for credit, and pushing short-term interest rates below zero. However, he added the remarks "should in no way be taken as a sign that we are planning to embark on these policies."

Speaking at The Empire Club of Canada, Poloz said he expects the economy can get back to full capacity with inflation sustainably on target around mid-2017.

“Given this outlook, it may seem like an odd time to be updating our unconventional monetary policy tool kit. I certainly hope we won’t ever have to use these tools”, said Poloz. “However, in an uncertain world, a central bank has to be prepared for all eventualities... should the need arise, we’ll be ready”.