Bank of Canada head says inflation target still 'live issue'

[OTTAWA] The Bank of Canada is looking closely at what level of inflation it should aim for as it prepares for talks with the government about renewing its mandate, but the bar to change is still high, governor Stephen Poloz said on Tuesday.

The central bank reviews its inflation targets, which are set jointly with the Canadian government, every five years. The current target is 2 per cent, the middle of a 1 to 3 per cent range.

Mr Poloz reiterated during testimony in front of a parliamentary finance committee that while the threshold for change is high because the inflation target framework is seen to have worked well, it is still a "live issue".

The bank is also looking at what is the right measure of inflation and how to integrate issues of financial stability, he said.

It was Mr Poloz's first comments since last week's interest rate decision. The bank left rates at 0.5 per cent, though it flagged the downside risks the economy faces.

Touching on the economy, Mr Poloz said recent data in Canada have been encouraging on balance but also quite variable. Mr Poloz also said the central bank had not yet seen concrete evidence of higher investment and strong creation of firms.

REUTERS