Wednesday, April 24, 2019 - 13:06

MNI POLICY: BOC's Poloz: No Rate Hikes Coming Soon, Nor Cuts

By Courtney Tower

OTTAWA (MNI) - The Bank of Canada's 1.75% policy interest rate is going to hold for some time to come, although weak exports, business investment and GDP growth are likely to improve in months ahead, Governor Stephen Poloz suggested to a press conference Wednesday.

Poloz told reporters that there is in the BOC "no rush to get back into the saddle" on rate hikes.

"We need time for the (fairly modest) excess capacity (that has grown in late 2018 and early 2019) to be absorbed ," he said. And time was needed for the Bank's expectations of better economic indicators ahead to be proved out.

However, to some who see rate cuts rather than hikes on the horizon, Poloz was firm in saying that "interest rates are more likely to go up than down, over time."

On whatever future rate decisions the Bank might take, he said, "data from here will tell us what to do."

Given current conditions, rate hikes are not foreseen for some time ahead, the governor indicated.

Poloz and his senior deputy, Carolyn Wilkins, spoke with reporters after releasing a stand-pat rate decision and an accompanying quarterly Monetary Policy Report (MPR) that dropped any reference to future rate increases.

While the March 6 statement dropped the reference to the need for the policy rate to rise, it did maintain the tightening bias, when it stressed "increased uncertainty about the timing of future rate increases."

On Wednesday, the BOC also lowered its estimate of the neutral range to 2.25%-3.25% from 2.5%-3.5%.

The Bank's MPR sees real annualized GDP growth of 0.3% in the first quarter this year, rather than 0.8% expected last January, rising to 1.3% in the second quarter. For all 2019, growth of 1.2% is expected, improving to 2.1% in 2020 and 2.0% in 2021.

Both global and Canadian economies are "in a bit of a detour" at present, due in large part to a variety of trade uncertainties in the world, but in both cases this would be temporary, Poloz said.

--MNI Ottawa Bureau; +1 613 869-0916; email:

[TOPICS: M$C$$$]

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