"Any negative inflation shock would bring us even further away from target, as opposed to getting closer, and in that context we decided that we should no longer have an explicit bias towards higher interest rates."
- Stephen Poloz, Bank of Canada Governor
Bank of Canada Governor Stephen Poloz has become more concerned about higher risk of inflation persistently running well below the 2% target. The central bank is adopting a neutral stance on the direction of key interest rates over the next few years, hinting it may be as ready to cut the cost of borrowing as to raise it, given low inflation and a weaker economic outlook through 2015. Canada's Dollar fell to a seven-week low after Poloz's testimony, while it dropped the most in four months after the decision to remove central bank's tightening bias—in place since April 2012. BoC Governor reiterated that stimulus provided by the 1% policy interest rate is appropriate in light of a slack in Canada's economy.
Meanwhile, Canadian manufacturers' raw material declined for the first time since April. The raw-material price index dropped 1.5%, reflecting lower prices for vegetable products as well as crude oil, according to Statistics Canada. Analysts, however, expected a 0.5% fall. The industrial product price index, which shows how much manufacturers received for their goods, declined 0.3%. Raw materials costs and industrial prices increased 2.1% and 1.0%, respectively, from September 2012, indicating factory profit margins narrowed.
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