Bank of Canada boss Poloz set to deliver first statement
Chief banker’s take on rates anticipated
Newly minted Bank of Canada governor Stephen Poloz will deliver on Wednesday what will undoubtedly be the most-watched statement from the central bank in recent months.
Some have been urging the bank’s policy council to drop what has become a stale tightening bias that goes counter to the easing positions of most of the world’s leading central banks.
Last week, 10 economists who took part in the C.D. Howe Institute’s monetary policy panel discussions were unanimous in urging the bank to keep its trendsetting overnight rate at one per cent — but in an unusual move, four voted to jettison the warning about future rate hikes.
The rationale for dropping the bias is that it no longer reflects that the bank will likely hold its key interest rate at one per cent well into 2015, and more importantly, doing so might help the economy.
Expectations of tighter monetary policies both in the U.S. and Canada have recently caused jitters in equity markets, as well as lifted bond yields and mortgage rates, while keeping the loonie artificially high. All three are bad for economic growth.
Last week, the U.S. Federal Reserve moved away from earlier hawkish statements, which sent U.S. and Canadian equities rallying.
The Bank of Canada could likely pull back some of the loonie’s gains, as well as impact longer term rates, with an unequivocal statement that it’s on hold for a lengthy period of time, said David Madani, chief economist with Capital Economics.
The first announcement date since Poloz took the helm at the central bank will also give him the opportunity to separate himself from his famous predecessor, Mark Carney, and put his own stamp on the institution.
Wednesday’s announcement, along with the release of the bank’s quarterly monetary policy report, will provide Poloz with ample scope to make an early first impression.