LONDON (ShareCast) - Speaking this past weekend at the World Economic Forum in Davos Bank of Canada Governor Mark Carney said central banks still have margin left to ease monetary policy further - if needed - and can be flexible in meeting inflation targets.
Of particular importance, he emphasised that the current task of monetary policy is to ensure that key economies can "achieve escape velocity."
In that same vein, he added that: "There continue to be monetary policy options in all the major economies."
"Within the framework of flexible inflation targeting that exists in most of the developed economies, there remains considerable flexibility," he explained.
That comes after last month he stoked a heated debate on what ought to be the monetary authority´s policies, when he said nominal gross domestic product targeting could be an even "more powerful tool" to stimulate economies.
Not coincidentally, Adair Turner, Chairman of the UK's Financial Services Authority, will say in a speech next month that an inflation target isn't enough to promote growth, the Sunday Telegraph reported yesterday.
Critically nonetheless, Carney also highlighted that while monetary policy can do its bit it does not have the ability to "set the seeds for a sustainable recovery,"
The Bank´s future Governor is due to testify before the Treasury Select Committee on February 7th regarding the Bank of England´s quantitative easing program.
It will be interesting to see what rating agencies think of this whole debate and its potential implications for the country´s AAA as well. They may not be as negative as one might fear, comment analysts at Digital Look.
Coincidentally, in a research note sent to Credit Suisse (NYSE: CRP - news) clients this morning ex-Bank of England policy maker Kate Barker argues that the Bank´s inflation target should be changed. In the current "exceptional" circumstances, she thinks a temporary change to a target range of 1-4% could be warranted. However, she argues such a change should only be temporary: once its near-term objectives are achieved, the policy remit should revert to a 1-3% CPI (Other OTC: CPIC - news) target.