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“We don’t need unconventional policies now, and we don’t expect to use them. However, it’s prudent to be prepared for every eventuality,” Governor Poloz said in a speech today to the Empire Club of Canada.
In the unlikely event that the economy was hit with another major negative shock, the Bank could implement unconventional monetary policy measures. These include forward guidance on the future path of its policy rate, stimulating the economy through large-scale asset purchases (commonly referred to as quantitative easing), funding to ensure that credit is available to key economic sectors, and moving its policy rate below zero to encourage spending.
Furthermore, the Bank no longer considers that these measures would be used in a predetermined sequence, the Governor said. Rather, it would use whatever combination of policies it judged appropriate under the circumstances.
“Regardless of the situation, the Bank will keep its primary focus on achieving the inflation target,” Governor Poloz said. Unconventional measures would be designed to minimize market distortions and risks to the Bank’s balance sheet.