WASHINGTON (Reuters) - Canada’s economy will start to show more positive than negative effects from the drop in oil prices from the second quarter onwards, Bank of Canada Governor Stephen Poloz said on Friday.
The Bank of Canada kept interest rates on hold last week after a surprise 25-basis-point cut in January, and markets have unwound bets on a further cut this year as prices for oil, a major Canadian export, stabilize.
Poloz said the drop in oil prices had been a “significant shock” for the Canadian economy, with the impact ranging from canceled investments to job layoffs and deferred purchasing decisions.
“The good news though is that we think it’s very front-loaded, a one-time shock, sets up adjustments in the economy, but there’s a lot of positives that come down the road,” he said at a U.S. Export-Import Bank conference.
“Starting in the second quarter we think the positives will be more important than the negatives and certainly in the second half of the year the shock should be fully behind us.”
Poloz said energy price fluctuations were creating difficult currents for central bankers to navigate, but that economies had to bear a bigger burden of the adjustment than policies.
The central bank expects Canada’s economy to grow at a 1.8 percent annual rate in the second quarter and by 2.8 percent in the third quarter, after posting zero growth in the first three months of 2015.
Poloz also said he was optimistic about growth in the United States, the country’s main trading partner.
Reporting by Krista Hughes; Editing by Paul Simao