BoC Governor Stephen Poloz said today in speech that “after a decade of extraordinary effort by central banks to flood markets with liquidity, the global economy has reached the stage where stimulus can be steadily withdrawn.” And, investors are now “confronting two sided risks to inflation”, as central banks are “shifting” the risks back to the market, the ” long-standing trend toward lower bond yields seems to be over”. As a result, the turn produced a “recalibration in equity markets” which is “creating a more normal level of market volatility”. But he emphasized such developments “do not point to a gloomy economy outlook by any means”. And they are merely “welcome symptoms of normalization”.
Poloz also emphasized that BoC must “attempt to weigh both the upside and downside risks and take a middle, risk-balanced path.” And he reiterated the bank’s stance on monetary policy. That is, given the growth and inflation outlook. BoC’s
“policy rate will need to rise to a neutral stance to achieve our inflation target.” And BoC will continue to monitor the economy’s adjustments to higher interest rates to determine the pace of rate hikes.
Poloz’s full speech, and video webcast.
