BoC Dep. Gov. Schembri Speech: policy framework could be challenged

Remarks by Lawrence Schembri Deputy Governor of the Bank of Canada Manitoba Association for Business Economists February 15, 2018 have been released:

• Higher debt levels, decline in interest rates, decreasing economic trend rate could challenge policy framework.
• If cyclical forces that would propel economy out of downturn are less powerful, policy might have to be more aggressive.
• Bank's 2 pct target is "Symmetric", meaning policymakers care equally about deviations above and below.
• Bank's 1-3 pct range reflects normal variations in CPI; temporary shocks make it "Impossible" to hit 2 pct consistently.
• Three new core measures not perfect but give better reading of underlying inflation than previous.
• Canada's inflation and inflationary expectations remain firmly anchored.
• Negative policy rates in some jurisdictions appear to be less effective in stimulating economic activity.

Key notes:

• USD/CAD hovers above C$1.25 amid stabilizing oil, positive US and Canadian data
• CAD: Focus on BoC’s Deputy Governor Schembri's speech - TDS

About the remarks:

Remarks by Lawrence Schembri Deputy Governor of the Bank of Canada Manitoba Association for Business Economists February 15, 2018 was titled, "Anchoring Expectations: Canada’s Approach to Price Stability". His remarks have been scrutinised for possible hints as to what the BoC's next move might be, and from these key statements, it appears the BoC is not looking to act on rates that would imply a negative rate and that QE would be the first port of call if required.