Poloz can't 'overly-tune' policy: Former BoC governor
Bank of Canada Governor Stephen Poloz needs to strike a careful balance with the central bank’s monetary policy as investors await another interest rate decision, one of his predecessors said.
“I think the lesson of history is that you can’t overly-tune policy,” former Bank of Canada governor David Dodge told BNN Bloomberg in an interview Monday.
“You begin to then get into trouble and so there’s a balance here between taking into account the quarterly, or semi-annual or annual changes in economic conditions and the movement of interest rates. That is the balance that central banks around the world are trying to strike. And that’s the balance – certainly – that the Federal Reserve and the Bank of Canada are trying to strike,” he said.
The Bank of Canada will announce its latest interest rate decision on Wednesday. The central bank held its benchmark rate at 1.75 per cent in January.
Dodge – currently senior advisor at Bennett Jones – also said there’s less need for Poloz to communicate where the central bank may be headed with future policy.
“We used forward guidance as a particular tool coming out of the 2008 recession. That was a tool for a very specific purpose at that point in time,” he said.
“That is no longer necessary and so I don’t think we are providing that sort of forward guidance here or in the United States or in Europe anymore. Indeed, the operative word is: Policy is going to be data-dependent.”
As for where the Canadian economy is headed, Dodge there is a slowdown ahead. He said he was unsurprised by the fourth-quarter numbers released Friday that showed Canada’s economy grew by only 0.1 per cent, adding he expects that slow pace to continue.
However, he did stop short of predicting a recession.
“Slowing was not unexpected,” he said. “We still don’t look for a recession, in terms of negative growth, but definitely a slowing from where we were … and that shouldn’t be a surprise.”