Bank of Canada’s Poloz Says Rate-Hike Path Is ‘Data Dependent’

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Bank of Canada Governor Stephen Poloz said whether he’s done with hiking altogether is a “data-dependent question,” adding the economy continues to work through headwinds that warrant stimulative rates.

Asked at a press briefing in Washington about investor expectations that the Canadian central bank’s rate normalization has come to an end, Poloz said market pricing seems to be consistent with interest rates “on hold for a while.”

Bank of Canada’s Poloz Says Rate-Hike Path Is ‘Data Dependent’

“What’s a while, I don’t know,” said Poloz, who spoke to reporters Saturday on the sidelines of the International Monetary Fund meetings. “Once again, that’s a data-dependent notion.”

“We don’t make policy day to day, we just read the data the same way the market does,” he said. “I’m certainly not going to front-run any of our policy discussions.”

The Bank of Canada, which has raised borrowing costs five times since mid-2017, has stopped talking about the need to raise interest rates in recent weeks and turned the focus instead toward keeping stimulus in place as the country copes with a slowdown. Poloz, whose next policy decision is April 24, struck a similar tone in Washington.

In the last rate decision on March 6, “we said pretty clearly, conditions warrant a rate of interest below neutral,” Poloz said. “So it’s obvious that we’re still working on some headwinds or things that are keeping the economy getting all the way home. That’s as far as I can go at this stage.”

Neutral Range

Poloz also dismissed the idea the central bank has any specific target it expects borrowing costs will eventually get to. The idea of a neutral range -- which the Bank of Canada has estimated at between 2.5 percent and 3.5 percent -- is just a “concept.” The central bank’s current policy rate is 1.75 percent.

“It’s an imprecise science and so when you try to impose precision on it, it’s just going to be frustrating because it doesn’t have the degree of meaning that you’d like to attach to it,” Poloz said.

“What matters is what forces are acting in the economy,” said Poloz, and what’s the level of interest rates that will bring the economy into balance.

“That number is going to change every time something hits the economy, whether it’s a positive thing or a negative thing,” he said.

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