Interest rates low enough to stimulate economy, upward path 'uncertain': Poloz

OTTAWA -- The head of the Bank of Canada says his trend-setting interest rate is low enough at its below-inflation level of 1.75 per cent that it's delivering stimulative effects to the economy.

But even in the stronger economy, governor Stephen Poloz says the benchmark rate's upward journey to its likely destination range of between 2.5 and 3.5 per cent is highly uncertain.

The bank's destination range -- or neutral range -- is an estimate of the preferred level for the interest rate when the economy is operating at full capacity and inflation is within its target zone of one to three per cent.

In prepared remarks of a speech in Montreal today, Poloz says the central bank remains data dependent as it watches the evolution of uncertainties related to the impact of higher interest rates on indebted Canadians, how housing markets adjust to higher borrowing costs and stricter mortgage guidelines, whether business investment picks up its pace and the unknowns of global trade.

The improved economy has encouraged the bank to raise its key interest rate five times since mid-2017 to keep inflation from creeping up too high -- but it hasn't introduced an increase since last October.

Poloz has said the central bank will likely continue hiking rates once the economy builds new momentum following a soft patch largely caused by weak oil prices late last year.

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