A couple of weeks ago, we wondered what influence Canada’s Finance Minister Jim Flaherty might wield over Bank of Canada Governor Stephen Poloz. In contrast to the recent dovish tilt of the country’s central bank, Mr. Flaherty prefers a more hawkish stance toward monetary policy. While the central bank is a quasi-independent institution, and any attempts to influence its policymaking are frowned upon, that doesn’t mean such pressure can’t be exerted in more subtle ways.

But for now, Mr. Poloz, who’s a more traditional central banker than his predecessor Mark Carney, remains narrowly focused on the worrisome trend of Canada’s persistent disinflation. The Bank of Canada’s (BoC) mandate targets a 2 percent inflation rate. Inflation is allowed to range from 1 percent to 3 percent, with the bank’s policymaking intended to guide inflation back toward the midpoint over a period of six quarters to eight quarters, which is roughly the amount of time it takes changes in interest rates to flow through to the economy.

However, monthly readings of inflation, as measured by year-over-year growth in the consumer price index (CPI), have fallen below even the low end of the aforementioned range seven times since November 2012. The CPI includes a number of volatile components, such as food and energy, which generate a fair amount of statistical noise in the short term, but even over the trailing year the low level of inflation has been sustained.

This trend has prompted a further softening in the BoC’s stance toward monetary policy. This week, the central bank issued its first rate statement of the year, and those who monitor the slight shifts in language from statement to statement saw a couple of noteworthy changes.

Most important is the fact that the central bank no longer asserts that the current level of stimulus “remains appropriate.” Instead, the BoC has removed that language and added an additional sentence stating that its policymaking will depend on its interpretation of how new economic data influence the balance of downside risks toward inflation. Although the bank maintained its key overnight rate at 1 percent, the new statement suggests that it could opt for a rate cut should the situation deteriorate.

However, this could finally be the more overt manifestation of the phantom rate cut that the bank has been working toward the past few months. In leaving rhetorical room for a possible rate cut, the bank can achieve certain policy ends without actually deviating from the status quo.

Given the present situation, Mr. Poloz would probably prefer to keep the overnight rate at its current level anyway. The economy remains dependent on overleveraged consumers, so a rate cut would simply spur more borrowing and increase debt burdens, while a rate hike could choke off growth.

But a phantom rate cut can help lower the country’s exchange rate, which will facilitate the economy’s rotation from its dependence on consumer spending toward exports and business investment. In fact, The Wall Street Journal notes that this was first interest rate statement under Mr. Poloz that explicitly mentioned the Canadian dollar.

The Great Recession and the period that’s followed, which Mr. Poloz has characterized as being more akin to post-war reconstruction than a typical recovery, along with the relative strength of the Canadian dollar until recently, have gutted the country’s non-commodity export sector, particularly manufacturing.

The loonie traded above parity with the US dollar for much of 2011 and 2012, but finally fell below this important threshold last year. The Canadian dollar currently trades near a three-year low, around USD0.90, down about 15.1 percent from its high during this cycle. While that’s eroded returns for US investors in the short term, most economists believe a lower exchange rate will boost Canada’s economy, which should be positive for the country’s stock market.

In the past, a downward move of 10 percent in the exchange rate added about 1.5 percentage points to gross domestic product (GDP) over time. That effect may have since diminished, but economists with National Bank Financial say that even if a lower exchange rate only accomplishes a third of what it used to do, then the past year’s depreciation would still add about four-tenths of a percentage point to GDP.

This currency effect may have influenced the BoC’s decision to raise its forecast for economic growth. The latest projection is that the economy will grow 2.5 percent this year, an increase of two-tenths of a percentage point from its prior forecast. That’s significant because the bank has previously stated that this was the minimum rate at which the economy would have to grow to reduce the country’s output gap. The bank did shave a tenth of a point off its projection for 2015, but its forecast of 2.5 percent growth for that year still meets the aforementioned threshold.

On the other hand, the central bank believes it will take another two years for inflation to meet its 2 percent target, in part because of retail competition. The BoC expects the latter to be a transitory feature of the economy, and certainly a lower exchange rate will eventually reduce the competitiveness of imports.

So while Canada’s economy remains challenged, its near-term growth prospects have moderately brightened.