TORONTO, Jan 18 (Reuters) - Below are some key quotes from an appearance by Bank of Canada Governor Stephen Poloz in Ottawa:
”When trade rules are changing in various places, there could be trade diversion effects that are quite unexpected. You really have to think carefully about an individual initiative or proposal and ask, what are the multiple effects that this thing could have?
“In a broad sense ... putting the trade architecture at risk for a trade dependant nation like Canada - it’s got the potential to be a negative shock. And the fiscal has the potential to be a positive shock.”
“Until we have actual downside risks, which are question marks being actually realized, causing us to doubt whether we can get to that sustainable point (of having inflation on target) in that reasonable time frame, then you know it is appropriate to reach a conclusion it is not time to try to add more stimulus, to try to speed it up or offset a new shock. So, as it is, we are still in that same ball park.”
“There is no compelling need to mention or not mention it. I am not surprised to hear you ask. We are quite open about it. We are in that ball park, where it would be nice if this thing went a little faster, but there are things that are coming. In particular, the infrastructure program which is well under way, should begin showing up in the data and that is going to be another key piece of reassurance as we go along.”
“What we’re faced with is, potentially, changes to our trade infrastructure, our trade architecture if you like, which have very complicated effects. When you change a trade policy there are usually, it affects people, individuals and companies, on both sides of the border. They react differently, they spend differently, they may invest differently, they may run their businesses differently. A company may adjust its profit margin, or it may invest more or it may invest less, it’s a very complex question so we will have to wait and see what sort of specific changes may occur. We shouldn’t analyze them by making them up, we have to analyze the ones that show up.”
“We must remain mindful that those competitiveness effects matter too, it’s not just the bilateral (Canada-U.S.) relationship that matters. In fact, when a company in Canada is competing for a contract to sell in the United States as an exporter we’re competing with exporters from other countries whose currencies may have been falling relative to the U.S. (dollar) while we’ve been holding steady.”
”I think, historically, this is not uncommon. When the U.S. dollar is moving significantly relative to most other currencies there is a tendency in markets to see ‘whatever the good news that’s affecting the U.S. must be affecting Canada too’ and so, historically, the correlation has been there.
”The labor market has been one of the brighter spots in the last six months.
“There’s a lot of slack left. Of course, when the economy improves the labor market should improve along with it. What you would hope to see is job growth across the country in a wider range of industries with more hours and certainly some people coming back into the labor force and those working part-time getting full-time jobs and with that some stronger wage growth.”
“Was the Bank on track to hike interest rates (before the U.S. election)? No.”
“Back in October we identified a number of things which were raising uncertainty beyond the normal level of uncertainty that we would normally deal with and so at that point we decided we did not have sufficient information to take further monetary action at that time, given those uncertainties. And I‘m arguing that in the post election period uncertainty remains undiminished and that’s a conservative statement. On many fronts, arguably, it has increased.”
”What we have is heightened uncertainty about trade policies in particular so we identified a number of downside risks as well as upside risks in our projection.
“Should any of those downside risks materialise and put our inflation target at risk then we would have the room to maneuver so, in that context, especially with inflation having been below target for a prolonged period, yes, a rate cut remains on the table and it would remain on the table for as long as downside risks are still present.” (Reporting by Fergal Smith, Matt Scuffham, Alastair Sharp.)