With the next rate hike likely a year or more away, Bank of Canada Governor Stephen Poloz can afford to keep a low profile at his second rate-setting meeting Wednesday.
He isn’t holding a news conference. Nor is he expected to alter the central bank’s prevailing “soft” bias toward an eventual return to higher rates.
The official line is that the bank will “normalize” rates when the economy gets back to normal.
But that hasn’t happened yet, leaving Mr. Poloz content to let the statement stand for a while longer.
“In effect, [the bank is] guiding the market to do absolutely nothing – a suitably bland fashion statement for late summer in Ottawa,” CIBC World Markets economist Avery Shenfeld said in a research note.
Bank of Montreal economist Benjamin Reitzes echoed that, saying “a low profile is exactly what the bank wants.”
Mr. Poloz has every reason to stay quiet, and little incentive to want higher rates now. The economy is sluggish (1.7-per-cent annual growth in the second quarter), inflation is tame and the long-awaited U.S. rebound is still a work in progress.
And even though the Bank of Canada isn’t officially tightening yet, there is some tightening under way in mortgage markets, where interest rates have begun to creep up. The market doesn’t need any additional nudging from Mr. Poloz.
Most economists don’t expect the bank to reset its official target for the overnight rate, now at 1 per cent, until October of next year at the earliest.
BMO’s Mr. Reitzes said Mr. Poloz needs three things to fall into place before he moves:
– The U.S. Federal Reserve to stop its easing efforts.
– A pickup in inflation.
– At least two quarters of “above-potential” growth.