Bank of Canada governor Mark Carney is promising that he will be transparent about any moves the bank makes to raise interest rates in the future.
In a speech delivered in Nanaimo, B.C., Monday, Carney told a Vancouver Island economic summit that Canadians will know exactly what the bank is doing and why.
He said the bank is preparing to release its Monetary Policy Report within the next 10 days that includes its outlook for economic growth and inflation in Canada.
"It will take into account the impact of the uncertainty that I have been discussing today," Carney said. "The bank will take whatever action is appropriate to achieve the two per cent consumer price index inflation target over the medium term."
He later told reporters that raising interest rates was a "hypothetical question," but one he didn't categorically rule out.
'While we obviously cannot determine events over which we have no control, we can be transparent about what we expect and how we would react to different scenarios,'—Mark Carney, Bank of Canada governor
The central bank governor said in his speech if he were to raise interest rates to stem mounting household debt, for instance, he would clearly state how long he expected the measure would take to work.
"The bank provides as much certainty as it can in the conduct of monetary policy," Carney said. "While we obviously cannot determine events over which we have no control, we can be transparent about what we expect and how we would react to different scenarios."
"That certainty is our contribution to ensuring that Canadians can invest and plan with confidence," he said.
It was unclear whether Carney was setting the grounds for a policy shift, but the example he chose was telling in that it targeted the one aspect of the economy that he has described as Canada's top domestic vulnerability.
"If we were to lean against emerging imbalances in household debt, we would clearly declare we are doing so and indicate how long we expect it would take for inflation to return to the two per cent target," he said.
Canadian households in dire debt
Revised figures from Statistics Canada now find Canadian households are even more in debt than anyone imagined.
The revisions place household credit market debt in the second quarter at 163 per cent of disposable income, well above the previously reported 152 per cent, although the two levels are no longer a direct comparison.
Carney said Canada's economy is being affected by what he called global angst, related to uncertainties in Europe, China and the United States, but Canada should consider itself in a state of justifiable confidence when compared to other economies.
"Canada's financial system showed itself to be among the most resilient in the world through crisis," he said. "Since then, it has strengthened further. One thing Canadian businesses can expect is that their financial system will be there if times get tough again."
He said the uncertainty facing global economies holds back demand for Canadian exports and tempers national business activity, but Canada should focus on improving its economy during these uncertain times.
"As Canadians, we need to focus on what we can control," he said. "We can improve Canada's low productivity growth and sharpen our focus on emerging markets. And we can continue to invest in our greatest resource — our people."
Carney later told reporters he is not seeking the federal Liberal Party leadership or even to run in federal politics.
He said he has more than two years left in his Bank of Canada post and he intends to fulfill that commitment.