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HIGHLIGHTS-Bank of Canada's Poloz speaks in St. John's, Newfoundland
September 27, 2017 / 5:22 PM / 3 months ago

HIGHLIGHTS-Bank of Canada's Poloz speaks in St. John's, Newfoundland

TORONTO, Sept 27 (Reuters) - Below are some key quotes from an appearance on Wednesday by Bank of Canada Governor Stephen Poloz.

POLOZ ON ROOM FOR LABOUR MARKET GROWTH

“The labor market space clearly has some room to grow, I talked a bit about youth unemployment and underemployment, so that would be the potential for expanding the labor force in that way, is an important consideration.”

POLOZ ON SUPPLY-SIDE GROWTH

“Almost certainty some of that surprise (of Q3 GDP growth) is on the supply side of the economy, not just demand. I‘m not in a position to predict that, but the folks at home are working hard at sorting that out as best we can.”

“It won’t be mechanical, it won’t be precise, it’s just that we have to give some weight to the possibility that the supply side of the economy is actually expanding more than we built in to the projection.”

“At this point in the cycle usually what happens is we over-predict inflation, and this is why.”

“You don’t usually forecast that, it’s sort of good luck when it happens and that’s just very common at this point in the cycle and as I discussed today I think that given the length and the persistence of the cycle we have a bigger chance that it’ll be a more important phenomenon that we see in a typical business cycle.”

POLOZ ON BUSINESS SENTIMENT AMID TRADE UNCERTAINTY

“There is considerable uncertainty about what trade policies, trade agreements, call them what you wish, will look like in the future, if you’re a business person you don’t live in the moment, you’re projecting ahead several years, you’re trying to be strategic about growing your business, and it must be quite difficult to do if there’s a risk that NAFTA will no longer be there for you to operate under, for instance.”

“As a business person I’d be watching that very closely and possibly operating in a way that hedges against that risk. So far, we’ve been impressed with how business sentiment has been in Canada, investment sentiment and business sentiment has been pretty solid despite this uncertainty, and yet everybody we interview talks about that uncertainty.”

POLOZ ON MORTGAGE UNDERWRITING

“The Canadian financial system is highly resilient. Banks now have very strong capital positions and buffers and, in fact, we’re underwriting new mortgages even more vigorously than in the past.”

POLOZ ON IMPACT OF INTEREST RATE HIKES

“We’ve raised interest rates twice but what will be the reaction? Our model tells us what it should be but it could be a little bigger. We have to cautious of that and keep gathering data and watching all the signals as we go forward.”

POLOZ ON CANADIAN DOLLAR

“There is no magic level and I‘m certainly not going to refer to the current level as harmful or beneficial or any of those things. It is a factor which must be taken into account.”

BOC‘S POLOZ: WE‘RE IN UNCHARTED TERRITORIES IN TERMS OF WHAT OUR GLOBAL ECONOMIES HAVE BEEN THROUGH

“The fact is that nobody really knows (where interest rates are going to go). We are in unchartered territory in terms of what our economies, and I say economies because we are not alone in this, have been through and how well they adjust as we move forward.”

BOC‘S POLOZ: THINGS THAT ARE ASSUMED IN OUR MODELS MAY NOT OPERATE EXACTLY AS THEY HAVE IN PAST

“Things that are assumed in our models may not operate exactly as they have in the past, so we need to continue to refine that as we gather more data.”

BOC‘S POLOZ: WE HAVE TO CONTINUE TO TRY TO UNDERSTAND UNKNOWNS; IT‘S A CASE OF “FEELING YOUR WAY”

“We have to continue to try to understand them (unknowns). Frankly, it’s a case of feeling your way as you go along.”

BOC‘S POLOZ: HOUSEHOLD DEBT IS OUR NUMBER ONE RISK TO FINANCIAL STABILITY

“It (household debt) is our number one risk to financial stability. It is a natural consequence of what we have been through. It is not surprising that it has occurred this way.”

POLOZ ON INFLATION

“We know that over the next twelve months much of the temporary factors holding inflation down dissipate and the thing that then drives the inflation outlook is just the output gap, and with that lag. So it’s very hard to imagine finding a scenario in which you perfectly get the output gap to close on the pinpoint, at the same point as you get 2 percent.”

“An overshoot is not something that we would ever plan for...what the range allows you to do is allow for the fact that something could happen between now and 18 months from now which throws off the actual inflation outcome, something that’s beyond your control.”

POLOZ ON BANK‘S COMMUNICATION STRATEGY

“Whether we need to do more is the subject of active discussion at the bank, as it actually always has been, we’re always discussing communications and thinking of new ways of going about them.”

“In general, we’re happy to get feedback from people and to engage in debates about these things. And I’d just point out that an awful lot of people were not surprised by that interest rate decision. How did that happen?” (Reporting by Alastair Sharp, Matt Scuffham, Fergal Smith in Toronto; Editing by Amran Abocar)

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