(Recasts with Schembri comment on stimulus, consensus)
By Mina Mohit
LONDON, Ontario Feb 9 - Official interest rates
in Canada are low enough to stimulate growth and close the
output gap by the middle of 2018, Bank of Canada Deputy Governor
Lawrence Schembri said on Thursday.
Speaking to a university audience after a speech on
inflation measures, Schembri said achieving consensus among
policymakers to set official interest rates was "relatively
straightforward," suggesting there is little dispute around the
table as the Bank of Canada continues to hold rates steady.
"What we've set is an interest rate that we feel is
sufficiently stimulative to ... close the output gap and to get
us back to our inflation target by the middle of 2018," Schembri
said during a question and answer session.
Schembri said policymakers receive economic projections and
a recommendation on interest rates by Bank of Canada staff,
which the governing council discusses before coming to a
consensus on monetary policy.
"Given that we're seeing a lot of the same information, it's
relatively straightforward to come to a consensus," Schembri
told an audience at Western University's economics department.
The bank makes decisions unanimously, as opposed to the
Federal Reserve, which votes on U.S. monetary policy.
Bank of Canada Governor Stephen Poloz said in January a rate
cut "remains on the table" if the risks facing the country's
economy are realized. The bank has held rates steady at 0.5
percent since cutting them twice in 2015, citing labor market
slack and an output gap that the bank does not expect to close
In a speech outlining the role of the inflation measures the
bank uses to guide interest rate decisions, Schembri said
policymakers are aware of the weaknesses of the gauges and
considers other factors when setting official borrowing costs.
"We use core inflation to give us a sense of where the
economy is at the moment, essentially what the starting point
for our projection is," he said.
The divergence of the three measures of core inflation used
by the Bank of Canada is not a weakness, but rather validates
the central bank's decision to use all three to measure price
pressures in the economy, Schembri said.
The Bank of Canada switched from using one measure of core
inflation to three late last year: CPI-trim, CPI-median and
CPI-common, which economists have said makes it difficult to
know what policymakers are watching most closely.
(Reporting by Andrea Hopkins and Leah Schnurr; Editing by James