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Governor Poloz highlights Canada’s challenges postponing rate rise

The Bank of Canada’s Governor Stephen Poloz addressed a panel of Canada’s top economists this afternoon in Quebec. The Canadian central banker touched upon a variety of subjects including low interest rates which he envisages will remain for the foreseeable. He confirmed that the interest rate set in July at 0.5% would ensure consistency in the economy and assist the Bank in achieving its targeted inflation levels. He also declared in his statement that he expected these interest levels to support the economy back to health by the end of 2017.

Many anticipate a rate rise would more likely happen mid 2018 than 2017.

Whilst he acknowledged that there were both winners and losers that were benefiting and being troubled by low rates. Mr Poloz appealed to savers and stated that any benefits generated by higher interest rates today would likely be erased by higher inflation, hence nullifying and future purchasing power.

Poloz confirmed that the Central Bank’s core objective was to maintain a low inflationary economy insisting it was the best way to ensure long-term sustainable growth. Concluding that this would benefit both savers and businesses in the future.

He said that Canada economy still faced headwinds and suggested the necessity for stimulative monetary policy and to let the full effects of the Governments fiscal stimulus to take effect.

Governor Poloz also touched upon the longer-term view for Canadian businesses. Focusing on recent declines in spending and investment in the sector. Whilst he acknowledged that businesses would feel uncertain of the future he claimed that businesses should embrace smaller returns and continue growing if only steadily in the knowledge that things would improve.

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The governor also discussed other initiatives to combat slow growth which included the new TTP or Trans Pacific Partnership which allows 12 countries including Canada, The US and Japan to trade more freely and offer more attractive trading terms. Governor Poloz envisages that these types of opportunities have the potential to add 3-5% to Canadas GDP over the next decade.

Following the statement USD/CAD dropped from 1.32253 and closed at 1.3212.

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