Verbatim: Poloz on Housing, Geopolitics and Business Investment

Ontario Tries to Temper Rising Toronto Home Prices

Bank of Canada Governor Stephen Poloz said he’s happy measures were taken by the Ontario government to slow Toronto’s housing market and expects the steps will have some impact. Here are highlighted quotes from a round-table with reporters that Poloz gave in Washington on April 22.

On Housing

“I’m happy there are measures. It’s a risk we’ve been highlighting and made it clear a week or two ago we didn’t think interest rates are the right tool for managing such a risk because they affect everybody. They are not localized.

“So I’m glad there are some measures. How will they work? Well, at least some of them were similar to what happened in Vancouver. It seems to have had some affect on the Vancouver market. We’re still monitoring that. So there’s reason to believe they will make a contribution.”

On Geopolitical Risks

“I certainly know that geopolitical risk is a term you hear more.” It was something you would hear around oil markets but now “it’s used more often and in a broader context. ”

“As forecasters we need to be mindful of an extra layer of risk than in the past.”

On Upward Growth Revisions

“It’s true upside surprises materialized so there was a revision up and that is the first time in quite a long time for the global level.”

After a period of serial disappointment when forecasters had to continually revise forecasts down, “at some point forecasters begin to say, ‘Gosh I guess that’s a long term trend or something.’ So, they begin to embody that. They are Bayesian in a sense. So the positive surprise at some point is inevitable.”

“Serial disappointment teaches you a lesson. For sure. what it does it teaches you to be cautious.”

“And yeah it is possible that surprise at the starting point was partly because our judgment was clouded by history, that’s just human of course. But we have our ways of ensuring every time we do a new forecast we’ve taken everything that is visible into account and we said that’s as honestly balanced as our methods will allow us. If its a mistake that’s been made, it’s in good faith.”

On Softwood Lumber

“At this stage what we did was we inserted a modest amount of negative judgment because we felt it looked quite likely that something was going to come and we are judging that based on the last time so if there is going to be some sort of countervailing duty that raises the prices of Canadian lumber in the U.S., chances are it’s going to cause lower exports.”

“It is an important business for Canada. It’s got a lot of employment in it and its geographically diverse. It matters.

On Business Outlook Survey

“In our BOS, the 100 interviews are much more in depth and what they are telling us is ‘Yeah, we’re ready to invest.’ Well, like what? Oh, maintenance, replacing this piece of equipment. So, it’s not expansionary investment, which is what we’re actually watching for. I’m not saying nobody is expanding because of course you can always come up with examples that are. But as a macro phenomenon it’s not really there.”

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