In the face of decreasing global resource prices, it is natural that countries will react differently, Bank of Canada Governor Stephen Poloz said Thursday morning in Ottawa.
Poloz headlined the first instalment of the Mayor’s Breakfast Series in 2016, delivering a measured keynote speech on divergent national monetary policies at Ottawa City Hall. He framed his remarks around responses to the global recession of the late 2000s an eight-year recovery process, he noted, that has been “anything but synchronized.”
“As the global economy enters a new year, divergence has become the dominant theme,” Poloz said, citing the U.S. Federal Reserve’s recent decision to begin normalizing interest rates and the European Central Bank’s contrasting move to trim its deposit rate below zero.
“The underlying forces acting on the global economy are powerful, slow moving and affect various economies differently,” he said. “This means that the theme of divergence — both financial and economic — is likely to remain with us for some time to come.”
Speaking amid a commodity price shock that has hindered Canada’s exporting capacity for just over a year, Poloz told the crowd of local business attendees that the economy must stay the course, in hopes that the loonie — bolstered by a flexible exchange rate — will eventually rise alongside oil prices.
“There is no simple policy response in this situation. The forces that have been set in motion simply must work themselves out,” he said. “The economy’s adjustment process can be difficult and painful for individuals, and there are policies that can help buffer those effects, but the adjustments must eventually happen.”
Poloz, an east Ottawa resident, began his seven-year term as Governor of the Bank of Canada in June 2013, after serving in a variety of roles with the Bank from 1981-95. More recently, he held a series of executive positions over 14 years at Export Development Canada, departing for the Bank after two years as EDC’s president and CEO.
The governor said Thursday that curtailing inflation is his current priority, adding that the Bank will release an updated outlook on Canadian currency, imports and exports later this month.
“The Bank of Canada will continue to run an independent monetary policy, anchored by our inflation target (of two per cent),” Poloz said, “and we will use our tools to manage risks along the way.”
Nick Faris is an Ottawa- and Toronto-based journalist, whose work has been featured in the National Post, Ottawa Life Magazine, the Kingston Whig-Standard and The Queen’s Journal. He is set to graduate from Queen’s University with a bachelor’s degree in political studies.