Bank of Canada's Poloz shrugs off Carney comparison

Tue Apr 28, 2015 1:17pm EDT
 
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By Leah Schnurr and Randall Palmer

OTTAWA (Reuters) - Bank of Canada Governor Stephen Poloz defended himself against criticism on Tuesday that his surprise January rate cut unduly shocked markets and for failing to use measured language like his predecessor, current Bank of England chief Mark Carney.

Poloz also said the negative effects from the oil price shock would last longer than three or four months, but would begin to be "overwhelmed" after the first quarter by renewed exports and other positives.

In an appearance before the House of Commons finance committee, Poloz was grilled by a Conservative Party legislator over the decision to cut rates in January by 25 basis points to 0.75 percent, then keep them on hold in April despite Poloz calling the first quarter "atrocious."

"Everybody follows your words very carefully, and I don't know if you're doing it by design, but the previous governor had his forward guidance policy but he was also extremely measured and aware that every single word he said was taken very seriously," James Rajotte, the committee chair, told Poloz.

"Are you by design trying to shock the markets occasionally with these words...? Because I think it is having that effect."

Poloz conceded in January the cut would catch some traders by surprise but it was necessary to move early because of the swift effect the price crash was having on oil-exporting Canada.

The market then began to price in another rate cut but the bank held tight in March.

"It's certainly not our intent to surprise or to frighten people," Poloz said on Tuesday.   Continued...

 
Bank of Canada Governor Stephen Poloz prepares to testify before the Commons finance committee on Parliament Hill in Ottawa April 28, 2015. REUTERS/Chris Wattie