Bank of Canada Governor Stephen Poloz appears to have lost his appetite for negative interest rates, according to Scotia Economics Vice-President Derek Holt.

“[Poloz] does not want markets to push him in the direction of negative rates,” Holt told BNN. “That would be an entirely uncharted waters experiment coming to Canada with net downsides to the economy and financial markets.”

Poloz opened the door to the unconventional monetary policy in a speech in December when he said Canada’s central bank could push interest rates as much as a half a percentage point into negative territory – and charge institutions to hold deposits – in the event of a crisis. Central banks in Denmark, Sweden and Japan already have a negative interest rate policy.

The Bank of Canada cut its key interest rate twice last year, but so far has held the rate steady at 0.5 per cent this year. Poloz said Canada’s economy is improving, but remains vulnerable as a result of the overheated housing markets in Toronto and Vancouver and continued weakness in the commodity markets.

The fact Canada’s economy continues to grow – despite the crash in crude oil prices – will likely keep Poloz from making any changes to interest rates, said Holt, particularly when there are already concerns about high household debt levels.

“There is a very high bar to entertaining a rate cut,” he said. “But he is also a long, long way from hiking.”