It is difficult trying to discern what Bank of Canada Governor Stephen Poloz really thinks about the exchange rate. Officially, he is agnostic. “The dollar is what it is,” Poloz said during testimony at the House of Commons Finance Committee on April 28, 2015. “No one, certainly not us, pins an industrial strategy on a weak currency.” Not an industrial policy, but perhaps a stimulus drive? “Oh, absolutely,” Poloz exclaimed earlier at that same committee appearance when asked if a weaker dollar was a net benefit to Canada’s economy. “Historically, it’s been a significant net benefit.”
So it would be unfair to call Poloz a currency manipulator: he has dropped Canada’s benchmark interest rate to within a quarter point of its record low because otherwise inflation would drop below 1%, the low end of the Bank of Canada’s comfort zone. (It aims to keep prices increasing at an annual rate of 2%, with a cushion of 1 percentage point on each side of that target.) However, it would be fair to deduce that Poloz is unmoved by arguments that a weak currency hurts Canadian business by making it more expensive to import cutting-edge technology and to expand overseas. “The entire calculus of the firm is affected by that exchange rate, but the most important thing is that it makes those companies more competitive when competing for new contracts,” Poloz said. “Existing contracts, which are already negotiated in U.S. dollars, yield a big increase in Canadian dollar revenue in those early months of that lower dollar.”
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