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TORONTO, April 12 (Reuters) - Below are some key quotes from an appearance on Wednesday by Bank of Canada Governor Stephen Poloz in Ottawa following the central bank's decision to hold benchmark interest rates unchanged:
"Given the circumstances we see, we're decidedly neutral. We believe the interest rate is at the appropriate level given what we see and as well things that we don't see, which are the risks that are weighing on decision-making in the Canadian corporate sector, which come from possible trade policy changes south of the border."
"Since we sat here three months ago, the data have not been uniformly positive, but they've been much more positive than they have been on balance for the last, I don't know, year, let's say."
"The truly independent instrument of financial stability is macro-prudential changes in the system, which the government put into place not that long ago. On that front I think we can be very confident that the quality of indebtedness is steadily strengthening, because people have to qualify a higher rate, that is in what we call the insured space, the foreign insured mortgages, which is the part where the rules apply."
"There's no question that having had low interest rates for some time that has been one of the things contributing to more demand for housing. That's why we've had low interest rates, to boost the economy and that's one of the main channels. But an interest rate of either 3 or 4 percent for a mortgage is not going to change someone's mind if they've made they are basing their decision on the assumption that the price of the house is going to rise by another 20 percent next year. Interest rates are not what is fuelling that speculation, it does add to demand at the bottom, of course."
"Just to complete that thought I would just note that consumer credit is only growing in Canada by around 5 percent per year, mortgage credit by about 6 percent. And so there is no credit boom to go with that speculative phase and so it's in that sense there are checks and balances lying around."
"Demand for housing is strong in the greater Toronto area. That's very fundamental. Employment growth has been strong, immigration growth has been strong, so there is obvious demand for housing. In that context, supply, although it has been growing, it has not been growing as fast as demand. So there'd be fundamental upward pressure on prices. We have known that for some time, so that hasn't changed. What has happened in the last year is that things have accelerated from that high teens to the 30 percent zone for price increases. Well, there is no fundamental story that we could tell to justify that kind of inflation rate in housing prices, and so it is that gap between what fundamentals could manage to explain and what is actually happening, which suggests that there is a growing role for speculation in that. In other words, demand is being driven more by speculative demand or investor demand as opposed to just folks that are buying a house."
"If there was a sizeable correction in a market like Toronto - Toronto is a really big weight in Canada - so that can affect people's expectations in other markets. So in the sense it could be, it has potential to be contagious but I wouldn't predict it to be contagious, it just could be.
"What would make that more likely would be if the context were, the trigger were a slowing economy, if the economy were slowing down. Like the sort of thing we imagine in the FSR, what would cause a financial stability risk to become manifest? If there were a generalized increase in unemployment across the country because of, say, a global slowdown, then you would have the potential for a correction in that market and then it would be more likely to be contagious because everybody is experiencing the same trigger."
POLOZ: IT'S TIME TO REMIND FOLKS PRICES OF HOUSES CAN GO DOWN AS WELL AS UP:
"As we've observed more than a year ago in the case of Vancouver, where we had similar kind of data points, when there is that large of a gap between what fundamentals might say and what you actually observe, then there is very unlikely to be a sustainable rate of price increase and I think it is timely to remind folks that prices of houses can go down as well as up."
"Any price that is rising at a rate of 30 percent or more has divorced itself from any fundamentals that we can identify. It puts it into what I would call an unsustainable zone."
"It is a question of risk management. What would you do if there was a correction. When something has been rising that quickly, of course it is vulnerable to a correction. But how big that could be, your guess is as good is mine."
"But I have to admit that in history there are lots of occasions when something looked unsustainable and it was unsustainable longer than you might have imagined. So there are no hard predictions around that."
"A rate cut, or further easing in policy, remains possible in the sense that there may be risks that are realized in the outlook, that pull us below the projection that we are offering up today."
"When we talked about that a few months ago we had seen a series of disappointing data points that led us to believe that the risks were beginning to tilt towards to the downside and the uncertainties that we were dealing with were similarly negative."
"And so it's in that context that we discussed the possibility of easing. But in this context, given the data that we've seen in the last few months, I can quite clearly say no, a rate cut was not on the table at this time." (Reporting by Fergal Smith, Alastair Sharp; Assembled by Dan Burns)