Central bank has wiggle room despite a warming Canadian economy: Don Pittis

Thursday, 22 June 2017, 11:42:52 PM. Bank of Canada governor Stephen Poloz has shown no inclination to raise interest rates despite rising inflation and a booming job market. So far, the data offers little pressure for him to change tactics.
Bank of Canada governor Stephen Poloz on Friday fulfilled a ceremonial role by unveiling a glamorous new $10 bill to celebrate the country's sesquicentennial.  This week, Poloz will discharge an even more fundamental duty, announcing the policy that makes sure the fancy 10, and the rest of Canada's money, retains its value. With inflation at two per cent, with the economy continuing to crank out jobs, and with continuing signs of an overheated housing market in many Canadian cities, the governor will face growing pressure to raise interest rates. So far Poloz has shown no inclination to follow U.S. Fed chair Janet Yellen in her move to put rates higher. In fact the last time he talked about changing rates, he was discussing a cut. U.S. Federal Reserve chair Janet Yellen, here with Treasury Secretary Steve Mnuchin, hiked rates and promises more while Poloz has holds steady. (Kai Pfaffenbach/Reuters) "Especially with inflation being below target for a prolonged period, yes, a rate cut remains on the table and it would remain on the table as long as those downside risks are still present," said Poloz in January.  Even though a widening spread between U.S. and Canadian rates should also widen the gap between the two currencies, the metrics the Bank of Canada uses to guide its policy mean the governor may be in no rush to change Canadian rates. Despite a recovery in trade and a job market that keeps growing, Poloz repeatedly offers a gloomy outlook on Canada's economic future,...Read more
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