November 3, 2014 / 5:43 PM / 4 years ago

Bank of Canada's Poloz highlights downside risks

Bank of Canada Governor Stephen Poloz addresses reporters after a meeting of G-20 finance ministers and central bank governors during the IMF-World Bank annual meetings in Washington October 10, 2014. REUTERS/Jonathan Ernst

OTTAWA, Nov 3 (Reuters) - - The gloom that seems to surround central bankers stems from the fact that risks associated with a new downturn in the economy and inflation are less easy to handle than surprises on the upside, Bank of Canada Governor Stephen Poloz said on Monday.

Though the Bank of Canada regards the risks around achieving the 2 percent inflation target are balanced, Poloz said, “we acknowledge that, in the current situation, the consequences of an upside risk would be more manageable than those associated with a downside risk.

“If this makes central bankers seem overly preoccupied with downside risks, and seem gloomy to you, then take heart - we are just doing our job,” he said in the text of a speech he was giving in Toronto.

Global interest rates will remain lower than in the past for a prolonged period because headwinds are restraining growth, he said, recognizing that some are asking if this was simply sowing the seeds of the next financial crisis.

“I might ask in response: What is it you would have us do, then?” Poloz said, adding that if Canada and the United States had moved their policy rates back up to neutral in 2011, the jobless rate would be two percentage points higher and core inflation would be between zero and 1 percent.

Reporting by Randall Palmer; editing by Leah Schnurr

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