Bank of Canada Governor Stephen Poloz said he is closely watching developments in the country’s housing market, global trade tensions and the impact of lower oil prices as he gauges the timing for the next interest-rate hike.
In an interview with Bloomberg TV at the World Economic Forum in Switzerland on Wednesday, Poloz cited these three issues as key determinants of the future policy, even as he reiterated his belief that borrowing costs are still likely to go up.
“It’s data dependent,” Poloz said, referring to the next rate move. “It will depend on how the economy responds to the shocks we’ve described.”
Poloz’s comments are in line with recent indications from the central bank that there’s less urgency to push for higher interest rates as the economy is coping with plunging oil prices.
Poloz also deterred criticisms that recent tightening by some central banks was ill-conceived and said higher interest rates will eventually be warranted in Canada, according to a BNN Bloomberg report, given the economy is already at near capacity with inflation at target.
“We are at a stage in the cycle where it always looks like monetary policy is doing the wrong thing,” Poloz said. Given the economy is “near its steady state, interest rates also should be near their steady state.”
Poloz said the actual level of that steady state is still an “open question,” but the central bank projects it’s between 2.5% and 3.5%.