Highlights of Bank of Canada Governor Stephen Poloz’ press conference on Jan 21, 2015:
- Original projection at $50 was that it would take until late 2017 to eliminate excess capacity
- If so, those risks would be even more material and it was prudent to take out ‘insurance’
- Lower profile for rates may encourage household imbalances but cushioning economy more important
- We generally prefer markets aren’t surprised by moves but felt possibility of rate cuts entered markets in “past couple of weeks”
- “We have the ability to take out more insurance” if the world changes but we don’t have that kind of pinpoint accuracy
- This is aimed at protecting the downside risks to inflation
- US economy appears on a self-sustaining growth track but it’s happening at 0% interest rates
- Sees ‘significant’ downside risks to Canadian inflation
- Oil shock will lead to increase in unemployment
- We must follow oil price and economic developments, no way to ‘add up’
- Does not see a risk of deflation, there’s a lot of space before we get to deflation
- “Stalled” to describe the economy sounds drastic but slowdown is significant
- A positive trend for growth remains under the surface, we have a two-speed economy
- We don’t know if oil prices will rebound or stay low
Bank of Canada governor Poloz Jan 21 2015
Poloz sounds like the BOC could cut again if oil prices continue to fall, or even if they remain low.
Update: After the press conference we don’t really have a great idea about what could be coming next for the BOC. There’s no guidance in the statement and Poloz didn’t talk about what could happen next, aside from saying that taking out more insurance is possible, they didn’t put any kind of timeline on it.
