Winnipeg Free Press - PRINT EDITION

Poloz counsels 'stability, patience'

Urges business to spend in his first major speech as central bank governor

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BURLINGTON, Ont. -- Newly installed Bank of Canada governor Stephen Poloz tried to rally business Wednesday toward the kind of spending he says is needed to bolster the economy, but gave no signal about any change in interest-rate policy.

In his first major speech since taking over from former governor Mark Carney earlier this month, Poloz preached the virtues of "stability and patience," saying the central bank's long-standing target of low, stable inflation remains "sacrosanct."

"We have already set the table: Interest rates are low, there's plenty of stimulus in the system," Poloz said at a news conference after a speech to the Oakville Chamber of Commerce.

"What I'm picking up from my conversations is uncertainty, a lack of confidence."

However, Canadian companies have been looking for opportunities in emerging markets, and those markets are growing "reasonably well," he said.

"The missing link has been the U.S. economy, and that link is coming in. With that combination, we think we'll see the kind of foreign demand that we need to cross the line into a more confident mindset."

Poloz attributed Canada's relatively good economic fortune through the downturn to households that took on personal debt.

"Given the circumstances, it was a good thing that households had the capacity to expand their spending. This provided the necessary cushion from the worst effects of the global contraction," he said in his speech.

Rather than the sometimes-hectoring tone of previous warnings about unsustainable debt levels, Poloz said the bank has "urged homeowners and other borrowers to do the arithmetic" on managing their debts when interest rates return to "more normal" levels.

The former head of the Export Development Corp. appeared relaxed and personable in his first public appearance in his new role, joking during the question-and-answer part of his appearance and taking a light-hearted approach to audience questions about the bank's rate announcement on July 17, promising to "think about it really hard between now and then."

This spring, Canada's central bank lowered its 2013 growth forecast by half a point to 1.5 per cent and announced in May its key lending rate would remain unchanged at one per cent.

The bank has estimated 2014 economic growth will be 2.8 per cent, followed by 2.7 per cent growth in 2015.

Poloz noted that "since the onset of the recession, there has been limited net creation of businesses," and exporters have been particularly hard-hit, with exports more than $100 billion lower than expected at this point in the economic recovery. "The good news is that the balance sheets of corporate Canada are healthy and the capacity to invest exists," he said.

The Bank of Canada governor gave his speech shortly before the U.S. Federal Reserve and his counterpart, Fed chairman Ben Bernanke, released their long-awaited policy statement.

As expected, the Fed kept a key lending rate unchanged.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition June 20, 2013 B9

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