BoC’s Beaudry: Path on interest rates can diverge from other central banks

“Floating Canadian Dollar gives the bank the flexibility to chart a different path than trading partners and focus on setting interest rates,” said Bank of Canada (BoC) Deputy Governor Paul Beaudry on Thursday per Reuters.

"What matters most is getting all the way there," said BoC’s Beaudry in a speech to the Alberta School of Business in Edmonton.

More comments

BoC is committed to bringing inflation back to target and will do so even if its policy-setting path diverges from central banks in other countries.

We know that it will take time to bet back to the Bank's inflation target.

Even if inflation has declined lately, we can't take our eyes off it too soon and let it remain significantly above target for too long.

It will take time to get back to the bank's inflation target of 2%.

If people start to base inflation expectations on current high numbers rather than the 2% target, high inflation becomes persistent, volatile and self-perpetuating.

It is important to stay the course in the fight against inflation despite the short-term pain that high interest rates can cause.

Without a sufficiently strong policy response, a drift in expectations away from the bank's inflation target can open the door to inflation remaining high and volatile for longer.

Even if inflation has declined lately, we can't take our eyes off it too soon and let it remain significantly above target for too long.

If inflation stays above target for a significant amount of time, then high and variable inflation will likely go hand in hand with a less efficient, more distorted economy.

USD/CAD grinds higher

The remarks escalate dovish bets on the BoC’s next move and propel the USD/CAD price. That said, the Loonie pair picks up bids to 1.3465 by the press time.

Also read: BOC's Macklem: Prepared to hike rates if inflation doesn't decline in line with forecasts