Stephen Poloz defends rate cut in appearance before parliamentarians
'Outside of the energy sector, other areas of the economy appear to be doing well'
The governor of the Bank of Canada defended his decision to cut the key lending rate in January while appearing before a House of Commons finance committee today.
Stephen Poloz and senior deputy governor Carolyn Wilkins appeared in front of the committee a little before 9 a.m. ET on Tuesday, to give more insight as to the bank's current view on the economy.
In his opening remarks describing the impacts of cheap oil on Canada's economy as "complex," Poloz said it "will take time to work their way through the economy."
"While the impact of the oil price shock is happening faster than initially expected, it does not appear to be larger than we anticipated in January," Poloz said.
Sudden cut in January
In January, the bank surprised many by cutting its benchmark interest rate to stimulate the economy. Poloz said Tuesday that no less than 25 other central banks have also decided to cut rates so far in 2015.
He suggested the long-term impact of that cut has yet to be fully felt, and may prove to be enough of an adjustment in the short term.
"Outside of the energy sector, other areas of the economy appear to be doing well," Poloz said.
Lower interest rates have been a boon to home prices, which in the bank's estimation are probably somewhere around 20 per cent overvalued across the country, Poloz repeated in his appearance.
But he shied away from a suggestion, in a question from an MP, that Canadian housing is in a bubble.
"If we were all buying a second or a third condo with confidence that it was going to rise in price, and sell it to someone else, that would be one of the ingredients you'd expect to see in a true bubble," Poloz said.
Senior Deputy Governor Carolyn Wilkins, who testified alongside Poloz, said there are signs of a soft landing in many areas of the country, with Toronto and Vancouver being exceptions.
"Those two markets are continuing to grow quite robustly," Wilkins said.
With files from Reuters