April 24, 2019 / 3:51 PM / a month ago

HIGHLIGHTS-Bank of Canada's Poloz and Wilkins speak after rate decision

April 24 (Reuters) - Below are some key quotes from a news conference by Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins on Wednesday after the central bank held interest rates steady.

POLOZ ON POTENTIAL MARKET REACTION TO POSITIVE DATA:

“My sense of it is as the data turn more positive, which is exactly what we would expect, we would expect to see the market react to that and you’d see that first, you’d see those kind of confirming signals ... But given where we are today we think that rates are appropriate for this outlook and I’ll repeat that if another negative came along we’d have to think about that over again, which is standard procedure, we are data dependent in both directions. Right now we need some positive data to actually confirm that this outlook is the appropriate one.”

POLOZ ON BOND MARKET SIGNAL:

“The bond market is still a very relevant place to watch how new data is processed.”

POLOZ ON SIGNAL FROM STOCK MARKETS AND CREDIT SPREADS:

“Our basic story here is the world economy and the Canadian economy are in a bit of a detour, that the slowdown is a temporary one and I think stock markets and credit spreads in the bond market are telling you that no one is looking for a really negative outlook for the world economy.”

WILKINS ON HOUSING MARKETS:

“You can see the froth working its way off by how price expectations, which looked like they were a little bit extrapolative, have come down, particularly in the (Greater Toronto Area) and (Greater Vancouver Area) and also the decline in investor sentiment.”

WILKINS ON HIGHLY INDEBTED CONSUMERS:

“It’s a major vulnerability, it’s the number one financial vulnerability for the Canadian economy, we still believe that even though it’s stabilized.”

POLOZ ON POTENTIAL NEGATIVE DISTURBANCE:

“We’ve obviously at this stage shifted to ground where we’re watching the data to make sure the forecasts are validated. If there was a new negative disturbance, that would be something that we’d consider as fodder for whether interest rates need to be revised down.”

POLOZ ON CONSERVATIVE APPROACH:

“There’s nothing purposeful (about BOC appearing to be more conservative).”

POLOZ ON CONFLICTING DATA:

“The data in the last couple of weeks kind of tied a bow on how the first quarter in particular is likely to look. We’ve got conflicts in the data. If you put a higher weight on the GDP and prices, in January you would be encouraged by that. If you put most weight on the labour market, you’d be encouraged by that. And then you get the expenditure indicators and they’re not in line with those things.”

POLOZ ON POSITIVE OUTLOOK:

“What we’re trying to convey is that right now, we believe that this setting of interest rates will give us the outlook that we’ve got here, which is a positive outlook, that growth picks up in the second quarter, and picks up for real in the third quarter for the second half of the year.”

POLOZ ON DATA DEPENDENCY:

“If everything turns out perfectly, there’s no rush to suddenly get back in the saddle. It’s more a question of letting the data speak. As you can see, not only are we data-dependant, but markets are highly data dependant.”

POLOZ ON FORECAST ERRORS:

“No one likes to make forecast errors of any size, but we know it’s part of the business. But I think in this case the main thing that we were trying to do is to capture something which is quite ephemeral, which is business sentiment and how it translates into investment decisions ... Furthermore, the shock that we’re dealing with, the one that is actually a forecast error is a global one.”

POLOZ ON TONE OF DISCUSSIONS:

“I would summarize the tone as a little bit skeptical of some of the most negative data that we’d received .... if your exports can’t quite get to port in time then they don’t get exported yet, so things kind of slow down because of weather.”

POLOZ ON POSITIVE SIGNS:

“The skepticism goes both ways. Well we’d say by all bits of analysis it’s a temporary thing, but we need the proof, you know we need the data to support it, and we’re seeing little snippets globally and so we’re not discouraged, we’re hopeful that those data points are lining up.” (Reporting by Nichola Saminather, Fergal Smith and Allison Martell Compiled by Denny Thomas)

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