September 16, 2014 / 4:44 PM / in 4 years

BoC's Poloz: won't try to control C$ value, market should decide

Bank of Canada Governor Stephen Poloz takes part in a news conference in Ottawa July 16, 2014. REUTERS/Blair Gable

OTTAWA, Sept 16 (Reuters) - The Bank of Canada is not trying to manipulate or even guide markets as to the value of the Canadian dollar, Governor Stephen Poloz said on Tuesday, adding that this gives the bank freedom not to match possible U.S. interest rate hikes.

In a business speech in Quebec, Poloz said floating rates helped Canada ride the tides of the global economy without overheating or unduly slowing.

“Trying to hold the dollar constant would give us larger fluctuations in unemployment, output and inflation, and in the end would not help us maintain our international competitiveness,” he said in his first speech on the Canadian dollar since taking over as governor in June 2013.

Many analysts have suggested Poloz, former head of Export Development Canada, prefers a weak currency in order to boost the exports he says are needed to take over from households as the driver of growth. The Canadian dollar has fallen 7 percent against the U.S. greenback since he took office.

Outlining a scenario where the U.S. economy was picking up speed and the Canadian economy was lagging - a scenario which happens in part to resemble current conditions - he said that if the bank were trying to hold its currency constant it would probably have to match U.S. rate increases in lock step.

“But doing so would risk pushing our inflation rate back below our target,” he said. “Attempting to control the exchange rate would mean giving up our independent monetary policy.”

editing by David Ljunggren

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below