* Backs Bernanke's communication on Fed tapering
* Canada benefits from U.S. private sector recovery
* Flaherty misses G20 meeting due to illness
By Randall Palmer
MOSCOW, July 20 All the talk of economic
weakness during the G20 talks in Moscow does not make the Bank
of Canada more inclined to keep rates low for longer than it had
otherwise planned, Governor Stephen Poloz said on Saturday.
Poloz also came to the defence of the U.S. Federal Reserve,
stating that Chairman Ben Bernanke's description of plans
eventually to taper its bond buying was carefully communicated,
as asked for in Saturday's communiqué of finance ministers and
central bankers of the Group of 20 leading economies.
The G20 meeting emphasized near-term growth and job over
fiscal consolidation, because of disappointing weakness
especially in Europe. Finance Minister Jim Flaherty did not take
part in the talks, despite travelling to Moscow, due to illness.
"Whatever we saw was consistent with what we put out just a
few days ago," Poloz said, referring to the Bank of Canada's
Monetary Policy Report on Wednesday.
"I came away reassured that you've got the story right ...
You get to talk to your counterpart from another country and
say, 'Here's what we're looking at,' and they say 'Yes, that's
about right,' and that's good validation."
The Bank of Canada had already slightly downgraded its
foreign outlook, Poloz said, "but you should remember that from
a Canadian perspective the mix of global growth is actually
turning more positive and that's because it's the U.S. which is
disproportionately the grower.
"One dollar more growth there is a lot more valuable to a
Canadian company than a dollar growth somewhere else, because
it's very much more likely it's a trading partner."
He added that the mix was stronger than it looked, because
it was government spending that was holding back the U.S.
economy, and the private sector, which buys Canadian goods more
than the government sector, was growing faster.
"So our foreign demand readings are doing better than that
global story would say. But we have to acknowledge the global
story has not gotten back - we have to keep watching that
evolution and everybody will feel better when it is," he said in
an interview with Reuters and another news agency.
Poloz's remarks about Fed tapering plans responded to
complaints from emerging markets that Bernanke's announcement
had caused market volatility and capital outflows from their
"We see what the Fed did was careful calibration and careful
communication, and I think that's exactly what we tried to do
earlier this week," he said, referring to the Bank of Canada's
interest rate statement on Wednesday, when it said low rates
would stay in place as long as three explicit conditions were in
He said policymakers had learned through the market reaction
to the Bernanke statement. "I would say markets were over
invested a little bit in certain plays, pretty crowded trades,
so when anything does change you get a certain amount of
unwinding of trades," he said.
"A degree of volatility ... is inevitable. You just have to
be mentally prepared for that and continue to emphasize the
message and be very clear what your policy intentions are."
Poloz was the sole Canadian representative at his level to
attend the G20 talks. Flaherty flew to Moscow for the meeting
but ended up sick and not able to attend.
His seat was filled for at least part of the meeting by Jean
Boivin, the Canadian G20 finance deputy. Flaherty has been
suffering from a rare skin disease, which had people wondering
whether he would stay on in the cabinet shuffle that took place
in Ottawa on Monday.
His spokeswoman Kathleen Perchaluk said the reason for his
sickness at the G20 was a stomach bug he had caught in Moscow.