October 24, 2018 / 3:50 PM / a month ago

HIGHLIGHTS-Bank of Canada's Poloz and Wilkins speak after rate hike

Oct 24 (Reuters) - Below are some key quotes from a news conference by Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins on Wednesday after the central bank raised interest rates.

POLOZ ON EVERY MEETING BEING LIVE:

“In effect, every one of our meetings is live ... markets seemed to have settled on gradual meaning we would only move every second meeting. To put it most bluntly, that’s what I heard from the street. We thought, well, we really don’t want to reinforce that as a locked in mechanical expectation.”

WILKINS ON LOW CANADIAN HEAVY CRUDE OIL PRICES:

“Clearly that is subtracting something from growth ... Overall, when you look at the whole commodity space, it is weaker, and so it’s shaving off a bit from Canadian growth relative to what we had in July.”

WILKINS ON GROWTH:

“The pattern of growth that we have in our forecast is really a function of ... how we see the fiscal policy in the U.S. continuing. So growth slows quite a lot leading out to 2020 with a little bit of slowing in 2019. We believe growth is the strongest in 2018.”

WILKINS ON WHETHER IT WAS HARDER TO FIND CONSENSUS ON SOME POINTS:

“I think every time the discussions involve a bit of debate, not because we’re not having a consensus, but because we’re kicking the tires, and so we like to play devil’s advocate. And this time in fact the things that I talked about in the opening statement were things that we discussed the most. How much of the uncertainty should we take off with respect to the USMCA? All of it? None of it? That was a point of discussion there.”

POLOZ ON MEASURES CALMING THE HOUSING MARKET

“The array of policies that have been put in place ... has calmed that down quit a lot and is actually contributing to housing affordability, considering what might have been the case if none of that had occurred. Hard to calculate, of course, but we can certainly imagine house prices would be significantly above where we are today in at least a couple of key markets.”

POLOZ ON ECONOMY NO LONGER NEEDING STIMULUS

“The reality is that the economy is at its capacity and is no longer needing stimulus. And so it’s our job to prevent the thing from overheating and creating inflation pressures down the road. And we don’t have any, so we’re in good shape. But we’re watching it very closely.”

WILKINS ON HOUSING MARKETS STABILIZING:

“As you know housing starts and other measures of activity fell off quite a lot at the beginning of the year and through the summer. We see that stabilizing and also in price space. And so we think that it has hit a level that is stabilizing in many of the markets, and of course the biggest changes were in the markets that had the most adjustment to make, so the Greater Toronto area and the Vancouver area, every where else was already a little bit more stable.”

POLOZ ON DROPPING OF GRADUAL LANGUAGE:

“It does permit the flexibility to move at a faster pace, but it would be completely hypothetical, depending on the data. And so it also permits us to go at a slower pace if the data suggests, for example, that the household sector is having difficulty digesting a higher rate of interest, if the adjustments prove more abrupt than our model suggested etc, then that would give us reason to pause and assess longer.”

POLOZ ON MAKING AN EDUCATED GUESS ABOUT POLICY DIRECTION:

“This is serving notice that it (rate hikes) could be faster or it could be slower. You watch the same data we watch, so it won’t be that hard to kind of make some educated expectational guesses around that.”

POLOZ ON TRADE TENSION BETWEEN CHINA AND THE UNITED STATES:

“For here in Canada, the main thing that we see already is lower commodity prices, which is a shift downwards in Canada’s terms of trade, but as time goes on it would be more like a slowdown in our export growth, because our principal trading partners were slowing.”

WILKINS ON THE PACE OF RATE HIKES:

“Every decision is a decision, and yes it’s possible that the pace could be a bit faster, but it’s also possible that it could be a bit slower, because as I said, the risks are two sided and we’ll be decidedly data dependent, and we’re hoping that participants in the markets and households will be doing the same thing.”

POLOZ ON FUTURE POLICY:

“Until some new shock throws us off of that trajectory, we wouldn’t be expecting to be going into a contractionary stance for policy. But what we do know today is that we are still being quite stimulative at a time when the economy really does not seem to need it - except for, as was just mentioned, perhaps there are some lingering adjustment processes ongoing.” (Reporting by Fergal Smith, Allison Martell and Anna Mehler Paperny Editing by Denny Thomas)

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