BOC's Poloz:Rate Hikes Cld Be Faster Or Slowr,Dependng on Data

By Courtney Tower

     OTTAWA (MNI) - The wording centered around Bank of Canada interest rate

decision-making changed Wednesday but Governor Stephen Poloz indicated that the

essential basis of choice remains the same: dependent on the incoming data and

on assessment of risks.

     Poloz was asked at a press conference whether markets wouldn't see the

central bank moving to a faster pace of policy rate increases since the wording

was dropped saying future increases were warranted but would come gradually.

Until now, rate announcements emphasized the "gradual" policy approach and the

data dependency. 

     The BOC said Wednesday in raising the policy rate by 25 basis points to

1.75%, in future the rate "will need to rise to a neutral stance", between 2.5%

and 3.5%, in order "to achieve the inflation target" of 2.0%. Questioners

thought markets would interpret this as indicating a faster pace ahead on rate

hikes.

     Poloz replied that the BOC could move to a slower or to a higher pace of

increases, and he used the words "data-dependent." Apart from data indicators,

the BOC will also continue to assess of the risks to the global and Canadian

economies from trade protectionism and the United States-China trade and tariff

dispute.

     Risks to such assessments were "two-sided," both Poloz and Senior Deputy

Governor Carolyn Wilkins said. There could be a further escalation of the

U.S.-China economic battle, or its de-escalation, each having attendant

consequences for weighing down the global and domestic economies or improving

them.

     The BOC said in its policy statement that the "appropriate pace" of

tightening would depend on how the Canadian economy adjusts to higher interest

rates and the future course of the US-China trade battle.

     Although Canadian households are highly indebted relative to income, the

quarterly Monetary policy Report said the Canadian housing market is

stabilizing, as are debt-income ratios. Wilkins said mortgage rate increases

thus far have been small or manageable for most mortgage-holding households,

except for the very highly indebted ones.

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

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