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The Bank of Canada is sounding less sure of itself.
The central bank's new statement on monetary policy , issued at 10am (ET), shows that its outlook for the Canadian economy has become less clear and more risky than it was earlier in the summer. Critically, bank boss Stephen Poloz and company are talking about the closing of Canada's so-called output gap – the excess production capacity in the economy – in less certain terms than they were in the previous statement in mid-July .
The bank now says it expects the output gap "to begin to narrow in 2014" – which differs from previous indications that economic growth in the second half of 2013 would be above the economy's assumed normal potential, an event that would be expected to narrow the gap. This itself implies that the economic pace for the rest of the year won't be as robust as previously anticipated.
The statement also dropped the reference previously to the output gap fully closing by mid-2015. This omission may well mean the central bank is less certain of that target than it was even a few weeks ago.
"Taken together, the two changes might indicate that the Bank is more pessimistic on near term growth, and/or less certain about the timing of the output gap closure," wrote CIBC World Markets chief economist Avery Shenfeld in a research note.
Mr. Shenfeld did wonder aloud whether this implication was "intentional," but it's not too often that official Bank of Canada monetary-policy statements contain inadvertent language. Mr. Poloz, who has a well-earned reputation as a gifted wordsmith, is unlikely to have had a slip of the keyboard here.
Indeed, much of the statement indicates a cloudier view of the economy – and the clouds are mostly blowing in from outside Canada's borders.
Significantly, the two key drivers that Mr. Poloz has identified to propel Canada's economy in the next several quarters – a shift toward export growth and business investment – have been "delayed" by "uncertain global economic conditions." More specifically, the bank identifies "slightly less momentum overall than anticipated" in the U.S. recovery, as well as rising uncertainty in the growth prospects for emerging-market economies.
One ominous addition in the latest statement is a reference to increasing "financial volatility" in emerging markets. This is the kind of risk factor that we saw all too often as a major impediment to recovery following the financial crisis. It's certainly an unwelcome new element to the central bank's economic forecasting model and interest-rate outlook.
On the other hand, we may take a bit of solace in the bank's seeming reduced concern about inflation – a critical element in its monetary policy. The statement's section in inflation was reduced to a single sentence, from four in the July statement. The message is that inflation is under control, is "well anchored" and will slowly work its way toward the bank's 2-per-cent target as the output gap narrows. Concerns about disinflation have, clearly, faded; it appears inflation is in a happy place where the central bank doesn't have to stress too much about it – or defend its inflation outlook – for a while.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe .