Stephen Poloz has a new and unflattering nickname – BiPoloz.
Insensitive, yes. Politically incorrect, certainly.
But the epithet making the rounds in financial circles underscores how markets are still struggling to decode the Bank of Canada Governor, two years after he replaced Mark Carney.
One day, he's the eternal optimist, the glass-half-full guy, confidently predicting an export renaissance will save Canada's sputtering economy.
The next moment he's a doomsayer, serving up a recession-like forecast and a second emergency interest rate cut in six months.
Huh?
Last week's quarter-percentage-point reduction in the overnight rate to 0.5 per cent didn't match the January cut on the shock meter. But it still qualifies as a surprise, given that financial markets had not come close to pricing in the move into its interest rate expectations or the dollar.
Both sides of Mr. Poloz were on full display during an hour-long news conference in Ottawa last Wednesday, as the Canadian dollar nosedived following the rate decision.
The bank's latest monetary policy report laid out a fairly grim picture. The economy will shrink in the first half of this year and eke out growth of just 1.1 per cent for the year – not the nearly 2 per cent it forecast just three months ago and a long way from the buoyant 2.5-per-cent pace it was predicting as recently as January.
Global developments in the economy have been "quite disappointing," Mr. Poloz lamented as he opened his news conference.
But then for much of the next hour, he carefully avoided even uttering the word recession, calling the whole discussion "unhelpful." He insisted that the more than 80 per cent of the economy not tied to commodities is doing just fine and the export-led recovery will be back on track soon, powered by the U.S. economy.
When he left the stage, Bank of Canada watchers were predictably split on whether Mr. Poloz will cut again this year. The market has priced in a 40-per-cent chance of a third rate reduction over the next few quarters, pushing two-year bond yields below the new central bank's overnight rate.
Reading the tea leaves has become much more difficult since last fall, when Mr. Poloz abandoned Mark Carney's practice of signalling the bank's thinking on the direction for future rate moves – known as "forward guidance." Mr. Poloz says he will now only do so in times of financial crisis, leaving analysts scrambling to divine the bank's bias.
He has also stopped issuing near-identical boilerplate statements at the bank's interest rate announcements – a practice that had allowed analysts to track subtle changes in the bank's evolving thinking.
The changes haven't gone down well with many financial institutions. Bank of Montreal, for example, complained pointedly that the demise of forward guidance has led to unnecessary volatility in bond markets. "Miscommunication can leave market conditions misaligned with the [Bank of Canada's] desired policy stance," BMO said.
Pacific Investment Management Co., or Pimco, one of the world's biggest bond investors, said it was getting out of Canadian bonds, citing the uncertainty of not knowing where rates are headed. Pimco's Canadian portfolio manager Ed Devlin said he's baffled why Mr. Poloz even bothers to do speeches, media interviews and news conferences.
"I fundamentally question someone who doesn't want to do forward guidance, but speaks," Mr. Devlin told Bloomberg in March. "If he doesn't want to do forward guidance, why is he speaking?"
At a House of Commons finance committee hearing in April, Conservative MP and committee chair James Rajotte pointedly asked Mr. Poloz if he was intentionally trying to "shock" markets with surprise rate moves and sometimes colourful language, including his comment that first-quarter gross domestic product would be "atrocious."
Mr. Poloz responded that he doesn't want to surprise anyone, pointing out that he does try to tip off markets to his thinking.
His defenders point out that forward guidance had become a crutch for bond traders, enabling them to make one-way bets. They also say markets have reacted selectively to Mr. Poloz's statements, often ignoring the bank's warnings of economic weakness, while seizing on the happy talk.
For Mr. Poloz, serial disappointment may be the inevitable price to pay for being an eternal optimist.