July 20, 2013 / 2:48 PM / 6 years ago

Canada rate message in tune with G20 debate: Poloz

MOSCOW (Reuters) - All the talk of economic weakness during the G20 talks in Moscow does not make the Bank of Canada more inclined to keep rates low for longer than it had otherwise planned, Governor Stephen Poloz said on Saturday.

Bank of Canada Governor Stephen Poloz takes part in a news conference upon the release of the Monetary Policy Report in Ottawa July 17, 2013. REUTERS/Chris Wattie

Poloz also came to the defense of the U.S. Federal Reserve, stating that Chairman Ben Bernanke’s description of plans eventually to taper its bond buying was carefully communicated, as asked for in Saturday’s communiqué of finance ministers and central bankers of the Group of 20 leading economies.

The G20 meeting emphasized near-term growth and job over fiscal consolidation, because of disappointing weakness especially in Europe. Finance Minister Jim Flaherty did not take part in the talks, despite travelling to Moscow, due to illness.

“Whatever we saw was consistent with what we put out just a few days ago,” Poloz said, referring to the Bank of Canada’s Monetary Policy Report on Wednesday.

“I came away reassured that you’ve got the story right ... You get to talk to your counterpart from another country and say, ‘Here’s what we’re looking at,’ and they say ‘Yes, that’s about right,’ and that’s good validation.”


The Bank of Canada had already slightly downgraded its foreign outlook, Poloz said, “but you should remember that from a Canadian perspective the mix of global growth is actually turning more positive and that’s because it’s the U.S. which is disproportionately the grower.

“One dollar more growth there is a lot more valuable to a Canadian company than a dollar growth somewhere else, because it’s very much more likely it’s a trading partner.”

He added that the mix was stronger than it looked, because it was government spending that was holding back the U.S. economy, and the private sector, which buys Canadian goods more than the government sector, was growing faster.

“So our foreign demand readings are doing better than that global story would say. But we have to acknowledge the global story has not gotten back - we have to keep watching that evolution and everybody will feel better when it is,” he said in an interview with Reuters and another news agency.

Poloz’s remarks about Fed tapering plans responded to complaints from emerging markets that Bernanke’s announcement had caused market volatility and capital outflows from their countries.

“We see what the Fed did was careful calibration and careful communication, and I think that’s exactly what we tried to do earlier this week,” he said, referring to the Bank of Canada’s interest rate statement on Wednesday, when it said low rates would stay in place as long as three explicit conditions were in place.

He said policymakers had learned through the market reaction to the Bernanke statement. “I would say markets were over invested a little bit in certain plays, pretty crowded trades, so when anything does change you get a certain amount of unwinding of trades,” he said.

“A degree of volatility ... is inevitable. You just have to be mentally prepared for that and continue to emphasize the message and be very clear what your policy intentions are.”

Poloz was the sole Canadian representative at his level to attend the G20 talks. Flaherty flew to Moscow for the meeting but ended up sick and not able to attend.

His seat was filled for at least part of the meeting by Jean Boivin, the Canadian G20 finance deputy. Flaherty has been suffering from a rare skin disease, which had people wondering whether he would stay on in the cabinet shuffle that took place in Ottawa on Monday.

His spokeswoman Kathleen Perchaluk said the reason for his sickness at the G20 was a stomach bug he had caught in Moscow.

Reporting by Randall Palmer; Additional reporting by Alessandra Prentice; Editing by Douglas Busvine

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