It’s been less than a year but it’s already looking like Stephen Poloz was a bad pick to lead the Bank of Canada. When he joined the fray he was full of fire and bullish on Canada. He talked about how a pickup in the US was going to spill across the border and boost the Canadian economy.
Now, he’s talking about rate cuts.
The Globe and Mail details the annual report and it’s full of comments like:
- “We are in uncharted territory”
- “The world has clearly changed since the global financial crisis”
- “New reality”
- The economy has “fallen short of our expectations”
What they’re really saying is “all our models are wrong”. Poloz almost admits as much and says they’re not rebuilding their assessment of how the economy works.
Poloz said the bank is now testing a variety of new models and methodologies to get a better handle on where the economy is headed, and updating its forecasts eight times a year. “We are working hard to refine those models, but this experience is also leading us to put increased emphasis on anecdotal evidence – real conversations with real Canadians making economic decisions,” Mr. Poloz said.
As the Bank of Canada learns to admit the economy is stuck in a low growth, low inflation trap like Japan it will pressure the Canadian dollar. Ultimately, however, the US and rest of the developed world is stuck in the same trap and while most of the Fed continues to believe days of +3% growth are ahead, they’re eventually going to come to the same conclusions.
