Flexible Currency Benefits Exceed Costs, Bank of Canada Deputy Says

Bank of Canada Deputy Governor Lawrence Schembri highlighted the benefits of the country’s flexible exchange rate system, which he said acts as a buffer to shocks and allows policy makers to run an independent monetary policy.

Canada’s current policy framework has two components -- a 2% inflation target and a flexible currency -- and the benefits of floating exchange rates “far exceed” any costs associated with currency volatility, Shembri said Monday in a speech in Edmonton. Targeting an inflation rate of 2%, meanwhile, also provides a “credible nominal anchor.”