Poloz confirms the pause
- Pace of increases remains 'decidedly data dependent'
- Repeats that neutral is 'in the neighbourhood' of 2.50-3.50% (1.75% is current rate)
- Continues to judge rates need to rise into neutral range
- Signing USMCA will likely support investment rebound
- Credit growth and strong demand show housing is stabilizing
- WCS discount has narrowed but spreading to light crude
- Painful adjustment already developing for Western Canada
- Data released since Oct MPR "have been on the disappointing side"
- Economy has less momentum heading into Q4 than expected
- Much of BOC's deliberations were focused on oil, prices well below MPR projections and demand could be hit by moderating global growth and trade tensions
- Main risk to outlook is trade tensions between US and other nations, says containing inflation risks would be paramount in an outright trade war
- Many highly-indebted countries will face difficult adjustment as mortgages reset and rates go up
- Full text
This is Poloz's last scheduled speech in 2018 and that makes it highly unlikely he will have time and an opportunity to pivot to something hawkish ahead of the January 1 meeting. The market is pricing in just a 23% chance of a hike at that meeting compared to 65% yesterday but anything above 0% is looking high at the moment.
