Bank of Canada chief says differs with OECD on outlook

Wed Nov 20, 2013 7:14pm EST
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By Louise Egan

OTTAWA (Reuters) - Bank of Canada Governor Stephen Poloz said on Wednesday the central bank's economic analysis differs from that of the Organization of Economic Cooperation and Development (OECD), which recommended it start raising interest rates as soon as 2014.

The OECD said in a report this week that as Canada's economic slack is absorbed, "monetary stimulus will need to be progressively withdrawn from late 2014 to counter inflationary pressures."

That contrasts with market expectations of a rate hike in the second quarter of 2015, according to the median forecast in a Reuters poll of primary dealers.

Poloz, asked about the OECD forecast in an appearance before a Senate committee, said economic models and judgments differ from one organization to another. He also said the bank's own outlook acknowledges an unusual degree of uncertainty and its forecast are more about likely ranges of outcomes than about pinpointing numbers.

"So those differences can show up in the way that this has," he said.

Poloz said persistently weak inflation and substantial slack in the economy have shaped the bank's view on the Canadian economy, which is decidedly less upbeat than it was a few months ago.

"Those things together give us the judgments that we've reached ... and obviously they differ in a material way according to those point estimates from what the OECD is saying ... I respect those, however, they're different from ours, and it's our job to reach that final conclusion," he said.


Bank of Canada Governor Stephen Poloz waits to testify before the Senate banking committee in Ottawa November 20, 2013. REUTERS/Chris Wattie