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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