UPDATE 2-Bank of Canada sees evidence exports poised to heat up

Thu Apr 24, 2014 5:49pm EDT
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(Adds comments from press conference)

By Bryn Levy

SASKATOON, Saskatchewan, April 24 (Reuters) - Bank of Canada Governor Stephen Poloz is more hopeful than before about an export recovery but is not straying from his mantra that an interest rate cut is just as possible as a hike because the economic outlook is so uncertain.

"We're expressing true neutrality on that question," Poloz told reporters after a speech on Thursday when asked if the bank's next move would be an increase or a decrease in its main overnight target rate.

"I want to be clear that the outlook as we have it is that over the next couple of years, almost exactly two years from now, our modeling suggests that inflation could get back to about 2 percent. That's assuming all the other things we've got in there happen, which includes the rebound in exports."

Poloz said he is more confident of exports and business investment strengthening after gaining a better understanding of how non-energy exports are performing relative to foreign demand from a new central bank study published on Thursday.

But if the more upbeat scenario does not materialize and exports do worse than expected, overall inflation will fall again and drift further from the bank's 2 percent target, he warned.

"The bank's analysis has given us a more granular interpretation of the export picture - and gives us more hope for the recovery of our non-energy export sector," Poloz said in a speech at a trade and export industry luncheon in Saskatoon, Saskatchewan.

"There's a great deal of uncertainty around that outlook as we've expressed clearly today and in the past," he said later in a news conference.   Continued...