POLITICS

Stephen Poloz signals new rate cut unlikely

04/20/2015 12:23 EDT | Updated 07/10/2015 09:59 EDT
Bank of Canada Governor Stephen Poloz says he believes the rate cut the bank made in January was "just about right" and that he expects Canada's economy to recover in the second half of the year.

It was a fresh indication, following on his revised assessment of the economy last week, that Poloz is not currently planning another cut to rates.

"The interest rate cut we made in Canada we think is the appropriate level to get us back on the track we saw" before the oil price drop, he said in an appearance at the Bloomberg Americas Monetary Summit.

Canada's economy was growing at 2.4 per cent in the last quarter of 2014, but slipped to zero in the first quarter of 2015.

Traders want clear signal

Panellist Erik Schatzker, a Bloomberg TV anchor, questioned Poloz about the way he surprised markets with that cut, saying that traders are "looking for more communication from central banks around the world,"

Poloz dismissed criticism that he should give clearer signals to the market on what is ahead on rates.

"Taking a lot of uncertainty out of the market by committing to an interest rate path is a distortion of the market," he said.

Poloz said the Bank of Canada has been "transparent" about the data it uses to make its decisions and he expects markets to follow the same data.

"If the data surprises, the market will be surprised," he said, adding that he would prefer not to deliver surprises.

In response to question about the impact of the U.S. central bank raising rates, he said that would be "positive" for Canada.

Canada's response will depend on what happens with markets, our dollar and trade after the Fed rate hike, currently predicted for as early as June or possibly September.

But Poloz said he hoped Canada's rate path would be "normalized" by 2016.