December 14, 2017 / 7:01 PM / a year ago

HIGHLIGHTS-Bank of Canada's Poloz speaks in Toronto

TORONTO, Dec 14 (Reuters) - Below are some key quotes from a news conference by Bank of Canada Governor Stephen Poloz following a year-end speech in which he said the central bank is growing increasingly confident that the economy will need less stimulus over time.


“We put stock in all those data, but that doesn’t mean there’s no slack left in the market. It’s just that wages may be showing the early signs of picking up. In particular, when aggregate wages are going up, they may only be going up in sectors that are tight, leaving lots of excess supply elsewhere in the labor market.”

“Wages, despite the fact that they have upticked, are still well below their typical level at this stage of the business cycle, so we know there is slack underneath there.”


“The uncertainty about NAFTA has been a persistent issue for the full year now. As we’ve indicated, the way we’re modeling it is not, per se, through how trade effects might sort themselves out, which is a highly ambiguous thing that depends very much on individual firm responses and varies a lot across sectors. But we think the one thing that they all have in common is the uncertainty is holding back to a certain extent investment decisions, and that’s a more profound effect on the economy.”


“I won’t prejudge them. They haven’t even been introduced yet. Right now, what we’re doing is monitoring how last year’s changes are affecting mortgage lending and we’ll be watching carefully as the new ones are put in place to watch how the system responds.”


“It’s more like gambling than investing. I think that it is a situation which has the ingredients of something that could be a significant disturbance. I’m hopeful that the system will treat it cautiously from here.”


“If the economy is operating near potential but we think there’s still a transition phase where the economy will build more potential, which is what I have in mind with that reintegration into the workforce combined with investment, means that potential output should grow a little faster than our assumption, so that introduces that downside risk to our inflation forecast.”


“The quarterly data points are the most important, because they have a fullness to them. But in between national accounts we get the labor market data points, we get wage data, we get trade, survey data, we get all those things. And it’s about keeping that full array in focus so we can keep assembling our story as we go through.”


“It’s not my style to offer up forward guidance. What we try to do is give people a transparent look at the issues that we are trying to understand and how they might affect our outlook. I don’t want to be confirming anybody’s bias or rejecting those biases.”

“Our views haven’t changed. Things are progressing nicely, but we need to be cautious not mechanical. Cautious is not a code word. It’s just like anybody driving in a snow storm. You need to drive a little slower and you watch all the signs along the way to make sure you stay on the road.”

“The data is telling us we are still on the road and that’s great so we’ll continue to be cautious because these uncertainties are still there and we’re hopeful that the data will gradually reduce those uncertainties for us and we can become even more confident. That’s a process. We’re describing a process not putting a specific timeline on it, we can’t.”


“If you’re going to go home from work and there’s a snow storm that afternoon, you may drive more cautiously... That doesn’t, I don’t think, translate into sitting in your car in the parking garage until the next day and going back to work... To me, cautious means exactly that, it means being careful and watching for data along to way to reassure you that you’re on the right track.”


“We haven’t learned much so far. It’s quite early days... In our models raising interest rates takes pretty well a year for it to have a truly noticeable effect on the economy. And then it’ll take another, probably a year, certainly another couple of quarters, for the rest of the mechanism to work its way and for us to influence inflation. So, almost two years from beginning to end. We’re only in the first half year of this.”

“The situation is muddied a little because we also have the changes to mortgage rules more or less at the same time. So we know that they will have an effect but we don’t have models for those things.”

“A, we don’t expect 50 basis points to have a large effect on the economy according to our models... And B, it hasn’t been much time to pick up on a small effect like that. So this is a judgment that will be reached as the data accumulates, and I can’t really say when we’ll really feel like we’ve got a stronger handle on that.” POLOZ ON IMPACT OF HOUSING

“Housing has slowed as a contributor to growth. And that’s all we’re really forecasting. It will slow down and in effect next year, contribute zero percentage points to GDP growth. We’re not looking for a really significant change in that, but a moderation.” (Reporting by Alastair Sharp, Matt Scuffham and Nichola Saminather; Compiled by Jim Finkle)

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