Poloz will not change Canadian economic policies based on the US Fed

Stephen Poloz, Governor of the Bank of Canada, has said that he will be focusing monetary policy on Canadian economic growth, rather than making changes based on the US Federal Reserve’s key rate.

The Canadian policy rate of 1 percent is higher than the US rate (which is near zero) and he is not concerned about the Fed increasing the rate above Canada’s.

Poloz said:

“That wouldn’t concern me in the sense that we have an independent policy, we are aiming for our inflation rate, not somebody else’s. The real question is: At what point will we get the fulsome follow-through from proved export performance to the U.S., when will we have that and when will it then begin to feed through to capacity investment and new jobs?”

A total of 74,100 new jobs were created in Canada in September, which was “welcome news”, according to Poloz. He added that the recent price hikes in Canada were only temporary and won’t affect monetary policy decisions.

Poloz will be announcing the central bank’s Monetary Policy Report on October 22.

When questioned about whether the US is the main driver in global expansion Poloz said that “it’s not a locomotive of any kind until it’s doing it by itself.”

Canadian labor-market slack

He noted that signs of labor-market slack still remains to be a challenge.

“When you start talking about slack, it’s going to take a substantial cumulative series of good reports to begin to put a dent in that.”

Poloz said that Canadian exporters would benefit if the renminbi is used as a global currency for trade in the future.

“Most Canadian companies that I talk to, if they are making a sale to a Chinese company, usually the contract is in U.S. dollars. All of that is a cost of doing business, but imagine if it went away, or half of it went away.”

“The natural order of things would be the most-used currencies kind of become common benchmarks, and I think it’s inevitable that someday the renminbi will be on that list.”