Bank of Canada says bar for changing inflation target 'extremely high'

Thu May 14, 2015 5:22pm EDT
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By Julie Gordon

VANCOUVER (Reuters) - The bar is "extremely high" for changing the Bank of Canada's inflation target when it comes up for renewal next year, bank Deputy Governor Lynn Patterson said on Thursday.

The bank, which reviews the target every five years, said last year it was researching whether to raise the target above the current 2 percent given the difficulties of setting monetary policy with interest rates near zero.

"We're obviously looking at things very seriously in this space," Patterson said in response to an audience question following a speech. "We have had the current inflation target in place for 20 years and clearly the bar is extremely high for change."

Patterson said the bank was also looking at other inflation topics, including the right way to measure core inflation. Her comments were similar to those of Governor Stephen Poloz, who noted earlier this year that the bar is high for changing the inflation target.

Economists said this week the central bank is unlikely to raise the target, given the risk to its credibility and the widespread support for the existing benchmark.

Patterson's comments followed a speech in which she outlined proposed changes to the way the central bank operates in markets, but cautioned operators against reading too much into what she called a fine-tuning operation.

The proposals were released in two consultation papers last week and are open for comments until July.

"No inferences should be drawn from this speech and the proposals in the consultation papers about the current or future stance of monetary policy," Patterson said in her address, which did not touch on monetary policy.   Continued...

Pedestrians are reflected in a window while walking past the Bank of Canada office in Ottawa March 4, 2015. REUTERS/Chris Wattie