BOC's Poloz: Monetary Policy Is In Uncharted Waters

By Courtney Tower

     OTTAWA (MNI) - Bank of Canada Governor Stephen Poloz said Wednesday that

"we're in uncharted waters" about where Canadian monetary policy may go next,

following two policy rate hikes in July and September.

     Poloz told questioning reporters in St. John's, Newfoundland, that "nobody

really knows" the exact course the Canadian economy may take in the future

because of so many factors that are unclear or changing.

     "We need to refine our understanding of the phenomena" facing Canadian

inflation and growth prospects, he said, after delivering a speech in which he

said that henceforth policy decisions by the central bank would be "particularly

data dependent."

     It is not that the BOC's econometric models do not remain very important,

but there are in the economy presently "a bunch of unknowns that we just cannot

assume away." Ongoing data surrounding them had to emerge and be studied in

order to see the prospects for inflation and growth.

     For the BOC now, "it's a case of feeling our way as we go along," he added.

     If being "particularly data dependent" means that clear forward guidance

cannot be given to markets by the BOC, Poloz would say only that improving BOC

communications was "a subject of active discussion" but that if some were taken

aback by the last rate hike there also were many who were not surprised.

     Among factors that were developing and needed careful watching, Poloz in

his speech had listed a changing output capacity of the economy, high household

debt, effects of the expanding digital economy, and slower-than-expected wage

growth.

     Another was the rise of protectionism in some places and "considerable

uncertainty" for companies and forecasters as to its likely effects.

     For instance, Poloz said, it is difficult for companies to plan ahead in

the face of "risks that NAFTA no longer will be there."

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

[TOPICS: M$C$$$]