Bank of Canada governor Mark Carney told federal MPs on Tuesday that central-bank intervention in currency markets — on its own — “seldom” works unless backed by other appropriate policy measures.
Further, he added, the decision to intervene is “not to be taken lightly,” and should be executed only if the dollar’s movements would have “serious consequences” on the economic outlook.
In testimony before the House of Commons finance committee, he said “at this stage,” the measures the central bank has put forward, such as the pledge to keep its key policy rate at a historic low until June 2010, are consistent with its objective to get inflation to the two-per-cent level.
The stronger loonie, up as much as 25 per cent this year, has subdued inflationary pressures, Carney said. The bank sets its policy rate with the aim of reaching two-per-cent inflation.
