The Bank of Canada periodically reviews its overall mandate and this time looked at four options, including a switch to average inflation targeting like the Federal Reserve.
A Reuters report last week tipped that there would be no change.
- Policy will be maintained for the next five years
- BOC will sometimes hold rate at a low level for longer than usual to address the challenges of structurally low interest rates
- Will use broad set of tools to deal with likelihood rate will often be at its lowest possible point
- Agrees with gov't that primary objective of monetary policy is to maintain low, stable inflation over time
- Monetary policy should continue to support maximum sustainable employment, while recognizing it's not directly measurable and is determined largely by non-monetary factors
- Will continue to use flexibility of 1-3% control grange to actively seek maximum sustainable level of employment when conditions warrant
- Because mon pol can exacerbate financial vulnerabilityies, bank will continue to be mindful that such vulnerabilities can lead to worse outcomes down the road
- BOC will consider a broad range of labour market indicators
There is a bit more talk here about employment than I would have expected and that might be interpreted as being more dovish but, operationally, I don't see how this is going to lead to persistently lower rates for Canada.
At the same time, there's a stark contrast to this talk and the cycle coming out of the financial crisis, where there was a big push to 'normalize' rates and get back to 'neutral'. However that's certainly not unique to Canada.
The loonie is under pressure today on broader omicron worries with USD/CAD up 64 pips to 1.2784.
BOC Governor Tiff Macklem and Fin Min Freeland will hold a press conference at 11 am ET (1600 GMT).
