BOC's Poloz: 2017 Rate Hikes Shouldn't Have Lrg Effect on Econ

By Courtney Tower

     OTTAWA (MNI) - Bank of Canada Governor Stephen Poloz said Thursday he

doesn't expect the two 25 basis point interest hikes this year, in July and

September, to have a "large" effect on the Canadian economy, while reiterating

the central bank's cautious approach in light of ongoing uncertainties.

     During a press conference following a speech to the Canadian Club of

Toronto, Poloz acknowledged again that wages have been showing early signs of

picking up, but warned that could be concentrated on sectors where conditions

are tight. He also stressed that wages are still "well below" their typical

average at this stage of the economic cycle.

     So the central bank needs to continue to watch data for signs it is not

making mistakes as it proceeds forward, which is Poloz' definition of

"cautious."

     Still, the 1.0% key policy rate presently is a large stimulus at a time

when the economy is functioning well and prompting some analysts to say hikes

should occur soon. But Poloz stuck to previous statements that because of the

uncertainties he would be cautious about any future hikes. 

     One analyst, Brian De Pratto of TD Economics, had written to clients that

the speech "confirms our view that the next hike will likely come sooner rather

than later," a questioner noted. Poloz refused to be drawn into giving any

guidance as to when that might occur.

     He repeated his speech line that "we are becoming increasingly confident as

the economy unfolds," so that less monetary stimulation will be needed at some

time. But uncertainties or conditions that remain, such as a continuing

difficult jobs situation for youth aged 15-24, still needed careful monitoring. 

     Another analyst, Nick Exarhos of CIBC Economics, wrote that Poloz' quite

upbeat remarks on the progress of the economy thus far "should keep the door

open to a Q1 rate hike."

     Turning to cryptocurrencies, Poloz threw cold water on the bitcoin

phenomenon.

     He likened the chart of bitcoin stock values currently as looking "like the

left side of the Eiffel Tower" but suggested it was a mania that couldn't last.

     To a questioner wondering whether the BOC should not be treating digital

currency and the Bitcoin phenomenon seriously, he compared the phenomenal rise

of Bitcoin in the markets to the tech dot.com bubble of the late 1990s. It

crashed but Poloz said that did not create much effect on the economy beyond

players in the stock markets. 

     "It's more like gambling than investing," he told reporters as he had said

in his speech to the Canadian Club of Toronto. "The level of hype around this is

quite extraordinary," he commented. "I'm hoping that the (financial) system will

treat it cautiously from here (on)." 

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]