Bank of Canada’s Poloz says 2015 rate cuts to help economy have ‘done their job’

“The economy is gathering momentum and not just in certain spots, but across a much-wider array,” Poloz said during his interview in Winnipeg.

“It isn’t time to throw a party, but it does suggest that the interest rate cuts we did two years ago have done their job, and that’s important to us.”

Poloz’s remarks came a day after the bank’s second-highest ranking official indicated the governing council was assessing whether the current, considerable level of stimulus provided by rock-bottom rates is still required.

In what was widely viewed as a highly positive or “hawkish” speech Monday, senior deputy governor Carolyn Wilkins said the economy had registered broad-based gains in recent months not seen since before the oil-price collapse.

Poloz echoed Wilkins’ optimism Tuesday.

“We’re encouraged by the data and so people need to be thinking about what their finances would look like were interest rates to be a little higher when they renew their mortgage,” he said.

Markets took note of Poloz’s comments and, for a second day in a row, a statement by a top Bank of Canada official gave a boost to the dollar.

The value of the loonie rose after Wilkins’ remarks, and again Tuesday following Poloz’s comments, to reach its highest level since late February.

However, Poloz also pointed to several lingering uncertainties that could mean the bank may not be ready to increase the rate at its next scheduled announcement on July 12.

He listed “missing elements” in areas like exports and business investment, although he added the latter has started to improve. Poloz also noted the unknowns surrounding economic policy in the U.S.

The recent Bank of Canada comments have also kept analysts busy as they try to reassess precisely when to anticipate the next rate increase.

Frances Donald, senior economist for Manulife Asset Management, wrote in a research note that markets increased the probability of a rate hike by year-end from 30 per cent on Friday to 60 per cent Tuesday.

“The (Bank of Canada) is likely to gradually shift from its ‘decidedly neutral’ tone to more hawkish over the coming months, so markets may be fully priced for a rate hike before they ring in the new year,” Donald wrote.

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Andy Blatchford, The Canadian Press

by Canadian Press

Bank of Canada’s Poloz says 2015 rate cuts to help economy have ‘done their job’

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