BoC's Poloz: Domestic inflation to be less driven by domestic forces

Bank of Canada Governor Poloz is crossing the wires, noting that domestic inflation is to be less driven by domestic forces, Reuters reports.

Key Quotes

Increased trade integration could make it more challenging for central banks to maintain inflation targets

Bank's conjecture is that increased integration will make economy less responsive to both interest rate and exchange rate fluctuations

Bank's models suggest central banks that ignore effects of integration will react too gradually to external shocks

Effects of fluctuations in domestic interest rates and exchange rates on domestic economy may lessen as economies become more integrated

Domestic inflation may come to be driven more by global demand and supply, less by domestic forces

Policy-makers must acknowledge that international developments will influence economies, volatility of financial markets

Policy-makers trying to counter integration effects could consider automatic fiscal stabilizers, or widening inflation-target bands