MNI POLICY:BOC's Poloz:Fin Mkt Msgs Consistnt W/Our Econ Outlk>

By Courtney Tower

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

Governor Stephen Poloz's speech in London, England, Monday, to the 

Canada-UK Chamber of Commerce, in which he expressed concern about 

global trade war risks but thought that the messages that financial 

markets are sending were generally consistent with the BOC's economic 

outlook: 

     - In a speech devoted to understanding what financial markets are 

telling policymakers, Poloz said the financial markets story currently 

is about what the Bank of Canada sees - that the past decade of massive 

monetary policy intervention in economies is over, that the risk of 

deflation finally is "off the table," that a return to normal is 

occurring, but that trade risks loom large for markets and for the Bank 

of Canada. 

     - The strong United States economy presently is strengthening the 

U.S. dollar and straining some emerging market economies, and these 

strains will continue. However, there is little evidence such strains 

are generalizing to all emerging markets. Overall, Poloz reaffirmed the 

October 24 projections for global and Canadian growth. 

     - Overall, the messages financial markets "are sending appear to be 

generally consistent with our economic outlook and our understanding of 

the main risks to that outlook," he said. In particular, the 

long-standing downward trend in long-term bond yields is reversing, so 

that a decade of massive monetary stimulation is ending. "Investors can 

no longer expect yields to be suppressed by extraordinary monetary 

policies," he said. 

     - Equity markets are "recalibrating," Poloz said, "creating a more 

normal level of market volatility." These characteristics are "welcome 

symptoms of normalization," he said. Risks are being shifted by central 

banks "back out to the market place, and the long-standing trend toward 

lower bond yields seems to be over." 

     - Poloz repeated the BOC's concern over US-China trade actions.  

Markets are also preoccupied with the downside risks of international 

trade actions, he said. However, related risks are "two-sided."  Trade 

disputes could escalate, or could be resolved. Poloz reiterated that the 

Bank's present 1.75% policy rate will have to rise to neutral. But he 

stressed that the pace of increases would be affected by the economy's 

adjustment to higher interest rates and by "new developments on the 

international trade front." 

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

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