Bank of Canada cheered by exports, but sees slack in job market

Tue Sep 16, 2014 4:51pm EDT
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By Allison Lampert

DRUMMONDVILLE Quebec (Reuters) - Recent Canadian economic data has been encouraging, particularly on exports, Bank of Canada Governor Stephen Poloz said on Tuesday, but he pointed to a substantial amount of slack in the job market.

His remarks followed a speech in which he said the central bank does not try to manipulate the value of the Canadian dollar or even guide currency markets, a stance that he said gives it the freedom to opt out of matching U.S. interest rate hikes.

While the Canadian dollar edged higher following the speech and press conference, market watchers were left with the impression that the central bank is in no hurry to shift out of its officially neutral policy, which means its next interest-rate move could be either a hike or a cut.

Poloz said there is a lot to be done before all the ingredients of a recovery are in place and that new data will be given "full consideration" in the central bank's next quarterly review of the economy, the Oct. 22 Monetary Policy Report.

But he made clear the Bank of Canada would not feel compelled to match eventual U.S. rate hikes if the Canadian economy is not ready for such moves.

"Our timing is our timing. The interest rates in Canada are already 1 percent; that's already quite a bit above what the U.S. rate is," Poloz said. "So there is some room to talk about where we should be going when the time is right and when the rest of the macro story is coming together."

Poloz has repeatedly stressed the need for exports to take over from consumers as the main driver of growth, a move that would be followed by investment and hiring by companies.

"It looks like the natural sequence we've been hoping for is getting under way," he said in his speech.   Continued...

Bank of Canada Governor Stephen Poloz takes part in a news conference in Ottawa July 16, 2014.     REUTERS/Blair Gable