BOC's Poloz: Path back to neutral rates is 'highly uncertain'

Author: Adam Button | Category: Central Banks

Comments from Bank of Canada Governor Stephen Poloz:

  • Housing activity has been weaker than we expected
  • Business investment has been less robust than models anticipated, mostly on NAFTA
  • Expect investment to gain momentum in 2019 but global trade environment is highly uncertain
  • Reiterates that BOC will remain 'decidedly data dependent'
  • Reiterates that plan is to move rates up to neutral over time but says timing is highly uncertain
  • Impact of higher rates in highly indebted Canadians is an important uncertainty
  • It is clear monetary policy continues to deliver uncertainty
The two main reasons that Poloz said that the BOC has moved to the sidelines are the impact of higher rates on highly indebted consumers and risks to business investment.

There is no change in communication or guidance from Poloz here. On net, you might have expected something a tad more dovish, so this (at the margins) is a slight Canadian dollar positive. CAD initially rallied on the headlines but that looks like a mistaken algo.

If you take a step back, the BOC is the only major central bank with a decidedly hawkish stance (although the Fed is arguable too). You might think that's bullish for CAD and the loonie has certainly done well this year but you could argue that the stance simply won't last so there's negative headline risk for CAD.

Watch Poloz live here. There will be a press conference after the event:

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