Bank of Canada Targeting "Neutral Stance" On Interest Rates Of 2.5% to 3.5%

Bank of Canada Governor Stephen Poloz says that the central bank is aiming for a "neutral stance" on interest rates of between 2.5% and 3.5% in the coming years.

Speaking earlier this week, Governor Poloz said that, after a decade of low-interest rates around the world following the 2008 financial crisis, the global economy is now in a stronger position and that stimulus can be "steadily withdrawn." He added that the Bank of Canada wants to eventually raise its trendsetting interest rate from its current level of 1.75% to between 2.5% and 3.5% -- a level that the governor said will provide a "neutral stance" for the Canadian economy.

The Bank of Canada recently implemented its fifth interest rate hike in 15 months and warned Canadians to get used to higher interest rates. In prepared remarks delivered in the United Kingdom earlier this week, Governor Poloz said the world economy has made considerable progress in shaking off the 2008 financial crisis. Interest rates around the world have remained very low over the past decade, but that trend now needs to change, said Poloz.

"After a decade of extraordinary effort by central banks to flood markets with liquidity, the global economy has reached the stage where stimulus can be steadily withdrawn," said Poloz in an appearance before the Canada-U.K. Chamber of Commerce.

He added that the risks of international trade actions, both actual and threatened, have preoccupied investors. But he argued that these risks are two-sided and resolutions to disputes can provide fresh economic lifts to countries around the world.

And Governor Poloz reiterated that Canada's projections for economic growth and inflation mean that interest rates will continue to move higher throughout 2019. The Bank of Canada will decide on the appropriate pace of the increases based on how well the economy adapts to higher interest rates that have already been implemented.