WASHINGTON (Reuters) - Canada’s economic growth has disappointed so far, Bank of Canada Governor Stephen Poloz said on Friday, and he acknowledged his upbeat-sounding speech last month had caused some market confusion over the bank’s outlook that needed correcting.
“It’s fair to say that growth has disappointed us to this stage. We are behind where we thought we would be, say a year ago or for that matter six months ago,” Poloz said at a news conference following a meeting of finance ministers and central bank governors from the Group of 20 nations.
“But still the signs continue to encourage, almost teasing you because it’s a little bit better but not as much better as you were hoping,” he said.
Poloz delivered a speech last month that was seen as surprisingly cheery because he said the economy was at a “tipping point” from improving confidence into expanding capacity.
Less than two weeks later, Senior Deputy Governor Tiff Macklem sounded decidedly gloomier and sharply cut the bank’s forecast for third-quarter growth.
Nonetheless, Poloz said the two men had identical views.
“We collaborate fully on all those things, and we were actually both saying the same thing,” Poloz said.
He said his own speech took a longer view, looking at the early signs of transition into a full recovery that did not rely on low interest rates. Macklem, on the other hand, was explaining how the bank would deal with unpredictable data in the short term.
“What Tiff (Macklem) was explaining was that in the near term — there was some confusion in the market about what our call was and it was influenced of course by the floods in Alberta and strikes in Quebec — we were trying to forecast choppy data and I wanted to make sure that people understood that,” Poloz said.
The hiccup in the bank’s communications comes as Poloz, who took the helm in June, plans to give his deputies more leeway to update the bank’s outlook in their speeches rather than wait for the bank’s quarterly monetary policy reports.
Unlike the U.S. Federal Reserve, the Bank of Canada officials have traditionally read from the same script, and there are no identifiable “hawks” or “doves.”
Earlier on Friday, Statistics Canada reported that the country’s unemployment rate had fallen to 6.9 percent, the lowest level in nearly five years. A substantial portion of the improvement in the jobless rate, however, is due to fewer youths participating in the job market.
Analysts in a Reuters poll predicted the bank would wait until the fourth quarter of 2014 to raise interest rates from the current 1.0 percent, where they have been since September 2010.
The prolonged period of low rates has fueled record-high levels of personal debt as Canadians take out more loans to buy houses and cars. Poloz said the high debt was an expected side effect of loose monetary policy but that consumer debt was now decreasing.
“You’re curing something which is bigger and you have to take those risks into account but they’re not, in a sense, fatal.” he said.
Poloz and Finance Minister Jim Flaherty spoke to reporters after attending a meeting of the Group of 20 advanced and emerging economies in Washington.
The standoff over the U.S. budget and raising the debt ceiling dominated the talks. Flaherty has said the impact on Canada so far from the U.S. government shutdown has not been significant and that he is confident the Americans will avoid default.
When asked if the central bank had a contingency plan in case of a U.S. default, Poloz suggested the bank would draw on the tools it used during the 2008-2009 crisis.
“The bank has at its fingertips a range of tools to ensure the system operates properly and that the liquidity conditions remains normal in all sorts of eventualities.”
Reporting by Louise Egan; Editing by Chizu Nomiyama and Dan Burns