Poloz Says January Rate Cut Was Enough for Canadian Recovery
(Bloomberg) -- Bank of Canada Governor Stephen Poloz said there’s no need for another interest-rate cut amid evidence the economy is recovering from the oil shock.
A global spate of monetary easing and rebounding oil prices are giving momentum to Canada’s recovery, Poloz said, adding his comments last month about the country’s first-quarter growth being “atrocious” were designed to discourage investors from betting on another rate cut.
Policy makers shocked markets on Jan. 21 by delivering a 25 basis point reduction to the benchmark rate, a move Poloz called “insurance” against the impact of falling oil prices. Those prices are recovering and the positive effects of the oil shock should begin to show up later this year, he said.
“The insurance amount was about right,” Poloz, 59, said Tuesday in comments to the House of Commons finance committee in Ottawa. “Therefore, there is no need for us to take further action to offset the shock that has occurred.”
Canada’s dollar appreciated to the strongest since the Jan. 21 rate cut today, rising 0.6 percent to C$1.2031 per U.S. dollar at 12:47 p.m. in Toronto. Responding to a question about the dollar’s value, Poloz pointed to a chart he brought showing the exchange rate has been in line with swings in prices for crude oil, Canada’s top export.
The central bank cut rates in the middle of a slide in oil prices, just as policy makers were crafting their projections, and the move wasn’t aimed to “surprise or frighten” anyone, Poloz said. Output growth will quicken to a 1.8 percent annualized pace this quarter and to 2.8 percent in the third quarter, the bank says.
“If you are expecting stronger growth in the second quarter and in the second half, then it would appear you don’t need to cut rates again,” John Clinkard, chief economist at Deutsche Bank Canada, said by phone from Toronto.
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