- Stephen Poloz, Bank of Canada Governor
Bank of Canada Governor Stephen Poloz said the January interest-rate cut appears to have helped to put the nation's economy back on track amid rebounding crude prices, and added the biggest risk to the outlook may be outperformance of the world's number one economy. Poloz became the first Group of Seven central banker to ease monetary policy in response to the sharp decline in oil prices, slashing the key rate in January to 0.75%. Poloz called it "insurance" against the effect of the downturn. In the aftermath of the surprise decision to slash the benchmark interest rate, bets on another cut this year surged. Though expectations fell as the central bank signalled more confidence in the economy and as prices for oil, a major Canadian export, stabilized and recovered partially, the market was still betting on a 35% chance of a rate cut in July. Poloz, however, said the BoC must consider the possibility that oil could renew its downward trend.
The biggest "risk" to the bank's outlook is the possibility the US economy will expand faster than expected, he said, noting that it would be a positive risk as strong US demand would stimulate Canadian economic growth. Poloz also said he would view a possible US Fed's rate hike positively as it would be in the context of assured US economic momentum. However, the Bank of Canada must still monitor inflation.
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