Poloz Says Canada Neutral Rate Remains ‘Sufficiently Uncertain’

(Bloomberg) -- The Bank of Canada is preparing to completely remove monetary stimulus from the economy, though Governor Stephen Poloz indicated Monday there remains uncertainty where exactly non-expansionary rates will end up.

Speaking to reporters at a press conference after a speech in London, Poloz said the central bank’s estimated range for the so-called neutral rate -- between 2.5 percent and 3.5 percent -- is “sufficiently uncertain” and “in principle movable.” It could rise or fall depending on global developments, he said.

“All we know is that as we get closer to it, whatever it is, we’ll begin to see signs that we’re no longer stimulating demand,” Poloz said. “In fact, we know if we cross into the neutral zone we may see signs” that demand is being constrained.

Poloz also said relatively high household debt levels may actually keep neutral rates lower than what would have been the case in the past.

“There is increased sensitivity there that one needs to take into account,” Poloz said. It “doesn’t mean a mechanical change to it. It just means more of a shading to that risk.”

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net;Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier

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