MNI 5 THINGS:BOC's Poloz:Trade Prominent in Next Deliberations>

By Courtney Tower

     OTTAWA (MNI) - Following are the key points from Bank of Canada 

Governor Stephen Poloz's speech to the Greater Victoria Chamber of 

Commerce in British Columbia, Wednesday, in which he outlined the key 

factors that will influence the Bank's next policy rate decision July 

11: 

     -- "We are working to incorporate in our projections the effects of 

the recently announced U.S. steel and aluminum tariffs, along with 

retaliatory measures both in Canada and globally," he said. The BOC is 

also analyzing individual-level data "to understand how the new lending 

guidelines in Canada are affecting the housing market and mortgage 

renewals." He expects "these issues to figure prominently in our 

upcoming deliberations." 

     --On Forward guidance, Poloz said it provides "a false sense of 

certainty to financial markets." And while publishing such as a 

projected path for policy rates could help reduce uncertainty in 

financial markets, it "reduces the reaction of markets to economics 

news. It suppresses the signalling role of financial markets." In the 

current environment, forward guidance would put BOC's credibility at 

risk. Instead, ending routine forward guidance has strengthened market 

signalling. Given today's "complex uncertainties", market signals have 

"never been more valuable to policy makers." 

     --On May 30 decision, he said the shift in language reflected  

increased confidence that the economy was performing as expected and 

that higher interest rates were warranted. He said financial markets 

understood that message. However, he underlined that since 2014, each 

interest rate announcement has been drafted "on a blank page" to avoid 

"getting locked into repeating specific language." 

     -- In today's climate of great uncertainty, "setting monetary 

policy is a matter of risk management," Poloz said. The BOC has to be 

"honest and transparent about what we know and what we do not know,"                                                               

so that markets could judge and decide outlooks and not be told what the 

outlooks would be. He said there is a "litany of things we simply don't 

know." In that context, the BOC is "particularly data-dependent right 

now". 

     --The speech otherwise focused on trying to make its communications 

more transparent and "readable". Most of what goes out is rated, by 

software that the Bank has employed, to be written at a university 

level, in other words not "accessible to the majority of Canadians." 

This speech, he said, "rates at about a Grade 12 level. So, the Bank now 

is working on clarifying its website, starting this fall with a new 

financial system hub aimed at broad audiences to give updates on the 

financial system. It will join a new digital-only publication that he 

calls "The Economy, Plain and Simple." 

     --MNI Ottawa Bureau; yali.ndiaye@marketnews.com 

[TOPICS: M$C$$$,MACDS$]