October 30, 2019 / 4:05 PM / a month ago

Highlights: Bank of Canada's Poloz and Wilkins speak after rate decision

TORONTO (Reuters) - Below are some key quotes from a news conference by Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins on Wednesday after the central bank held interest rates steady.

FILE PHOTO: Bank of Canada Governor Stephen Poloz speaks during a news conference with Senior Deputy Governor Carolyn Wilkins in Ottawa, Ontario, Canada, July 10, 2019. REUTERS/Chris Wattie

POLOZ ON TRADE TENSIONS

“We’re talking about something very intangible. How do companies adapt to this trade frustration or trade uncertainty? Well they don’t usually just sit there, they do things, and so you have to kind of read the data and see how it’s going as opposed to just doing arithmetic. So with that much uncertainty, I think the best solution here where we are, is to hold firm and watch things develop.”

POLOZ, ASKED IF BANK CONSIDERED AN INSURANCE RATE CUT IN SEPTEMBER

“The direct answer to your question is no. Certainly we could see which way the winds were blowing, that the risks were beginning to accumulate on the foreign side.”

WILKINS ON FACEBOOK’S PROPOSED LIBRA DIGITAL CURRENCY

“These kinds of innovations can address what I think are important issues in the global payment systems, particularly the cost of cross-border payments. If you are trying to do a remittance, you are here and you want to send money to the Philippines, well it costs a lot of money. If you’re in another country, not so much Canada but in others where you don’t have access to a bank account, you can’t even make those payments. And so this idea of being more efficient and getting access is quite attractive. At the same time, we know that innovations never come without risk and so when you balance that risk-reward you have to take some of the risks associated with these types of innovations, including Libra, pretty seriously.”

POLOZ ON HOUSING

“We do feel that first of all, the new stress test and other ... changes have served pretty well to kind of get a situation into a more normal sort of behavior. And we were watching, as you know, for a while, to see how disruptive that might be for the housing market. So the housing market had a weak year or so, but it’s coming back across the board. And so that’s all encouraging.”

“But ... it’s still possible, of course, to reignite a bunch of bidding wars and so on in the housing market, because as far as I know not much has changed on the supply side. By having lower rates and good income growth, and immigration, there’s good demand for housing.”

POLOZ ON HOW CLOSE THE BANK IS TO CUTTING RATES

“We estimate given the growth slowdown that we have right at this moment in the second half of the year, that we are opening up a modest output gap somewhere between zero and 1%, the middle of that range 0.5% is the point estimate. That is not something to ignore, especially if more downside risks appear but in this context, with our forecasts still keeping inflation very close to 2% ... that puts us in a position to weigh the risks in their totality and as I said in my opening remarks to not take out an insurance cut, as some have called it in this setting, given that we are there and that there would be costs associated with that.”

POLOZ ON IMPLICATIONS OF MINORITY GOVERNMENT

“That makes no difference to our analysis here at all. Of course, we act independently with our mandate and it is all about what’s the inflation forecast. And that is why I mentioned at the end that if the fiscal line in our forecast changes, in the post election period, then that would be one thing we need to take into account the next time we do a forecast.”

POLOZ ON SIMILAR OUTLOOKS FOR CANADIAN AND U.S. ECONOMIES

“There’s a lot of talk about divergence but actually what has occurred is more of a convergence, that is U.S. interest rates have come down to about the same as our levels because they went up farther in the first place. So we are kind of converged in this situation right now and our outlook for the two economies is not that different.”

POLOZ ON AMOUNT OF MONETARY STIMULUS IN THE CANADIAN ECONOMY

“There is substantial monetary stimulus in the system and that of course has been a factor for a long time. As we have said for literally years, there are headwinds pushing against the Canadian economy and until those headwinds dissipate you won’t see a return of all policy parameters back to what we call normal or non-stimulative levels. We did think we were getting pretty close previously, but then of course we had the trade war and as well some more issues with the oil markets, another shock from that source.”

WILKINS ON GOVERNMENT BUDGETS

“We just take fiscal policy as given, but it’s a very important given, and of course whether it’s a provincial budget or a federal budget, those announcements can change the bottom line in terms of growth ... It has implications for the outlook, and therefore for monetary policy.”

POLOZ ON CANADIAN DOLLAR

“The Canadian dollar has been relatively stable in its primary exchange, which is against the U.S. dollar. It’s been in a pretty narrow range, slightly higher than it was a year or so ago, but the main thing that’s happened is the U.S. dollar has been strong globally.”

POLOZ ON IMPACT OF STRONGER CANADIAN DOLLAR

“My sense is that it can bite on certain margins but as far as the competitiveness across the U.S., most of the conversations go to other things than the exchange rate.”

POLOZ ON DROPPING LANGUAGE ABOUT ECONOMY BEING CLOSE TO POTENTIAL

“I think you just proved my contention that it’s best not to say the same thing every time, because it means that people do get hung up on terms, and whether they’re there or not there each time. So as I think I’ve told you many times, we start with a blank page and tell a new story.”

Reporting by Allison Martell and Fergal Smith and Jeff Lewis; Compiled by Denny Thomas

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