(Bloomberg) -- Bank of Canada Governor Stephen Poloz said any decision to cut interest rates further is complicated by the two-track nature of the recovery and the fact the country would be nearer to unconventional monetary tools.
Speaking to lawmakers Monday in Ottawa, Poloz reiterated the central bank considered cutting interest rates ahead of last week's rate decision to bolster the nation's growth track, but held off because of uncertainties around the outlook.
“We have to weigh the risks of waiting longer against what are the costs associated with doing something more immediate,” Poloz told the House of Commons finance committee.
He added that “our best plan right now, we think, is to wait for the next 18 months or so,” comments that lifted Canada's dollar from a seven-month low set earlier on Monday. In an e-mailed statement following the testimony, Poloz said the comments weren't a reference to monetary policy.
“My statement concerning the need to wait 18 months was in reference to the time frame over which the output gap is expected to close, as noted in the Bank's October Monetary Policy Report,” Poloz said. “It was not intended as a reference to the Bank's monetary policy.”
Poloz's testimony came a week after deciding not to cut his 0.5 percent policy interest rate again, citing the potential for fiscal stimulus to carry the load and for business confidence to recover after the U.S. election.
He told lawmakers on Monday that further stimulus is complicated because of different parts of Canada have different growth paths.
“When we have the Canadian economy operating on two tracks -- one track doing reasonably well and in certain regions doing quite well, and others adjusting through something quite difficult -- it's not as easy as it sounds to speed up the fast-growing parts to offset the slow growing parts,” Poloz said.
He also said moving the central bank closer to unorthodox monetary policy stimulus wouldn't be an easy decision.
“If we were to be easing further, we'd be very close to using unconventional tools, and so that's of course not a decision we take lightly,” Poloz said.
Poloz still said further stimulus is possible if needed. “Monetary policy has room to maneuver and we are ready to use that room,” he said.
To contact the reporters on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net, Josh Wingrove in Ottawa at jwingrove4@bloomberg.net. To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary
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