Bank of Canada’s Poloz Says Monetary Policy Still Effective

The following are comments by Bank of Canada Governor Stephen Poloz on why he thinks monetary policy is still effective.

“One worry I hear a lot these days hits pretty close to home -- the idea that monetary policy just isn’t working anymore. That’s one myth I’d like to dispel right off the top.”

“The fact is that policy actions -- both monetary and fiscal -- taken in the wake of the global financial crisis prevented what would have been a second Great Depression. But many of the negative forces that were acting then are still acting now. That’s why ultra-low interest rates are not causing rapid growth and inflation.”

“If you think monetary policy is not working, ask yourself what would happen if interest rates suddenly returned to 3 or 4 percent. Most would agree that such a move would trigger a recession. This is just another way of saying that severe headwinds are still acting on our economies, years after the crisis, and low interest rates are keeping them at bay.”

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