Bank of Canada surprises with dovish tilt after holding rates
By Andrea Hopkins and Leah Schnurr
OTTAWA (Reuters) - The Bank of Canada cut its growth forecast on Wednesday and said it actively discussed adding more monetary stimulus to speed up the nation's economic recovery, surprising financial markets by shifting tone dramatically after its initial rate decision.
Citing a looming slowdown in Canada's long housing boom and a weaker outlook for exports, Bank of Canada Governor Stephen Poloz said the central bank had considered easing monetary policy but was held back by global uncertainty.
Poloz revealed the stimulus discussion in his opening statement to reporters more than an hour after publication of the rate decision, wrong footing financial markets that were not expecting the dovish shift.
"If you look at the press release at 10, that had a very balanced tone and you would have said 'Okay, day over, nothing to see here.' And then you get to the press conference opening statement and it's almost like a big bombshell," said Emanuella Enenajor, Canada economist at Bank of America Merrill Lynch.
David Watt, chief economist at HSBC Canada, said there was "clearly a disconnect" between what the bank said early in the day and what was communicated to reporters later in the news conference.
"The markets obviously got two different versions, two different interpretations, of what was said," said Watt. "You would like to have more consistency."
Poloz has upset market players with unexpected moves in the past, including a shock January 2015 rate cut.
It was the second time in six months the central bank admitted it had considered adding more stimulus to the economy to counter persistent disappointments in growth and exports. Continued...