Bank of Canada Governor Stephen Poloz said he is keeping a close eye on developments in the nation’s housing market, as well as global trade tensions and the impact of lower oil prices, as he gauges the timing of his next interest rate increase.

In an interview with Bloomberg TV at the World Economic Forum in Davos, Switzerland, Poloz cited those three issues as key determinants of future policy, even as he reiterated his belief that borrowing costs are still likely to go higher.

“It’s data dependent,” Poloz said. “It will depend on how the economy responds to the shocks we’ve described.”

The comments are in line with recent indications from the central bank that there’s less urgency in its push toward higher interest rates as the economy grapples with slumping oil prices. After five interest rate increases since mid-2017, markets are now anticipating the central bank will have no more than one more rate increase lined up before pausing indefinitely.

Unsettled Housing

One issue the Bank of Canada has been monitoring closely is the economy’s sensitivity to higher rates, particularly in housing, where the the increased borrowing costs have led to a a slumping activity in major markets like Toronto and Vancouver. As he gauges future policy, Poloz said Wednesday the housing market hasn’t “quite settled down” and he’d like to see it stabilize to know “where we stand.”

The comments on housing “suggests to me we may be on a pause for awhile,” given the recent weakness in home sales and prices,” Craig Fehr, strategist at Edward Jones & Co., told BNN Bloomberg Television after the Poloz interview.

At the same time, Poloz fended off criticism that recent tightening by some central banks was ill conceived and said higher interest rates will eventually be warranted in Canada given the economy is already at near capacity with inflation at target.

“We are at a stage in the cycle where it always looks like monetary policy is doing the wrong thing,” Poloz said. Given the economy is “near its steady state, interest rates also should be near their steady state.”

Poloz said the actual level of that steady state is still “an open question” but the central bank estimates it’s between 2.5 per cent and 3.5 per cent. The Bank of Canada’s policy rate is currently at 1.75 per cent.