BoC Deputy Governor Lawrence Schembri said that Fed’s adoption of a more dovish policy framework last week could in the end benefit the Canadian Economy. The central bank is also considering to allow an inflation overshoot like the Fed does.
“Our models show that despite an appreciation of the (Canadian) dollar that might result from the Fed lowering interest rates, on net we’re better off because there’s more activity and more demand for Canadian exports,”he said.”
“Maybe there’s an opportunity to overshoot the target a little bit or tolerate an overshoot if we want to be aggressive in reducing the risk of being at the effective lower bound,” Schembri said. “We might be willing to tolerate a small overshoot or, like the Fed has done, actually aim for an overshoot. And that’s a question we are pondering right now.”
