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Bank of Canada governor Stephen Poloz says risks from household debt and the housing market will be better addressed by the government’s recent policy moves than by adjusting interest rates.
In a speech in Vancouver, the head of Canada’s central bank says adjusting interest rates is a “very blunt tool” that has widespread affects.
Poloz says the so-called macroprudential policies are best placed to deal with threats to financial stability because they can be designed to target specific financial vulnerabilities.
The central bank and the federal government renewed their inflation-targeting framework agreement last week.
The Bank of Canada uses its the inflation target when determining monetary policy and setting its key overnight interest rate.
In its new agreement with the government, the target was kept at two per cent — the midpoint of a range of one per cent to three per cent that the central bank deems acceptable.
However, the Bank of Canada says it will change the way it measures core inflation which it uses to help focus on the underlying trend in inflation. It will use three different ways to measure instead of a single method of assessing core inflation.
