Comments from Tiff Macklem as he's introduced as next BOC Governor:
- Virus situation calls for unprecedented response
- Situation calls for unprecedented response
- BOC will continue to provide essential liquidity
- Doesn't make sense to introduce more uncertainty
- Negative rates among tools at BOC
- Sees downside risks to recovery scenario
The comment about negative rates is weighing on the Canadian dollar. Macklem sounds like he's been sent there to torpedo the loonie but if you look closely at exactly what he said, he's saying he's against negative rates:
Verbatim:
"The Bank of Canada has elaborated a framework with unconventional instruments. The possibility of negative interest rates is included in that list. The reason it hasnt' been deployed is that there are some disruptive effects of negative interest rates. It's hard to explain to depositors why their deposits are shrinking in their accounts when they're not taking money out. When you've already in a disruption, you might want to be hesitant about introducing a new source of disruption so when you look at the current situation, I'm quite comfortable with the effective lower bound where it is."
You can watch the comment here.
This is a great example of the headlines diverging from the reality. The thing is, it might take the market awhile to pick up on this and the broader rout in risk assets isn't going to do the loonie any favours:
It's also yet another example of a rookie central banker not realizing how the game is played.
