Don't know if Canadian interest rates will rise again this year: Poloz

Speaking at the World Economic Forum in Davos, Switzerland, Bank of Canada governor Stephen Poloz said he doesn't know the potential for the country's central bank to hike interest rates again in 2018.

Central bank is 'totally data dependent' when it comes to course setting on rates, Poloz says

Stephen Poloz, governor of the Bank of Canada, attends the World Economic Forum annual meeting in Davos, Switzerland on January 23, 2018. (Denis Balibouse/Reuters)

Bank of Canada governor Stephen Poloz said Thursday he doesn't know the potential for the country's central bank to hike interest rates again this year.

"That's a question even I don't know the answer to," Poloz said during an interview with CNBC during the World Economic Forum in Davos, Switzerland.

"We're being very open about that. So we've explained to people that there are a number of important issues that force us to not be mechanical or to use a rule or to plan ahead in that way. We've said we are totally data dependent," he said.

On Jan. 17, the Bank of Canada bumped the target for the overnight lending rate to 1.25 per cent from one per cent — the third time it has moved its benchmark rate from once-record lows last summer.

The bank also bumped up its expectations for how the economy will perform this year and in 2019. The bank now expects Canada's economy to expand by 2.2 per cent this year and 1.6 per cent next year. Previously the bank was anticipating 2.1 and 1.5 per cent growth.

Despite the mainly positive stance on the economy's prospects, the bank cited "uncertainty about the future of NAFTA" as a reason for concern.

In his CNBC interview in Davos, Poloz agreed that the central bank was "NAFTA dependent," but added that it isn't possible to predict the bank's response if the trade deal is terminated or significantly changed.

"If the economy began to slow as a result, then we'd be able to put those pieces together, then it would go into the mix, the inflation target would be at risk, and we'd be cutting rates into that. But a lot of things could move at the time," Poloz said.

The Bank of Canada's next monetary policy decision date is March 7, but markets do not have great expectations for a hike at that time, with only a 27.7 per cent current implied probability of a boost. That probability rises above 95 per cent for decision dates late in 2018.

Poloz declined to comment on the Canadian dollar, which shot up Wednesday following comments from U.S. Treasury Secretary Steven Mnuchin that the weaker greenback was positive for U.S. trade. 

The loonie was trading Thursday at 81.33 cents US, up more than 0.34 of a cent from Wednesday.