BoC Governor Stephen Poloz reiterated that more rate hikes are warranted for the central bank. But the timing would be “data dependent” and “it will depend on how the economy responds to the shocks we’ve described.” He referred to developments including Canada’s housing market, trade tensions and import of lower oil prices.
In particular, Poloz noted the past increase interest rates could lead to slumping activity. And the housing markets hasn’t “quite settled down”. He would like to see how the markets stabilize to know “where we stand”. That’s a sign taken then BoC could opt for a pause for a while.
But Poloz also defended past rate hikes of BoC and some other central banks. He noted “we are at a stage in the cycle where it always looks like monetary policy is doing the wrong thing”. And, given the economy is “near its steady state, interest rates also should be near their steady state.” But Poloz emphasized that the actual level of the so called steady state, or neutral rate, is an “open question”. BoC estimates it to be 2.5-3.5%.
