Poloz says 2015 rate cuts have ‘done their job’

The Bank of Canada sent out more signals Tuesday that it’s moving closer to an interestrate hike as the economy continues to strengthen.

Governor Stephen Poloz told the CBC in an interview broadcast Tuesday that rate cuts by the bank amid the oil-price slump have largely accomplished their goal of helping the economy.

The bank reduced its trendsetting rate twice in 2015 to the very low level of 0.5 per cent to help offset the effects of the oilprice shock.

But following an encouraging run in recent months for several economic indicators, the Bank of Canada appears to be preparing for its first increase in nearly seven years.

“The economy is gathering momentum and not just in certain spots, but across a muchwider 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.