BOC’s Poloz: Resilience of the Canadian economy could be seriously tested by coronavirus

In a scheduled speech delivered on Thursday, the Bank of Canada (BOC) Governor Stephen Poloz said that the resilience of the Canadian economy could be seriously tested by coronavirus, depending on the severity and duration of its effects.

Additional comments

Reiterates that bank is ready to cut rates further if needed to support growth and keep inflation on target.

Management demands a prompt and sizable monetary policy response to larger shocks to ensure economy remains well-anchored.

Bank felt that downside risks to economy were more than sufficient to outweigh continuing concern about financial vulnerabilities.

Global economy will at the very least be significantly disrupted by coronavirus in h1 2020.

Is possible global economy will snap back after health professionals have managed situation, but outbreak and effects could be more persistent.

Canada is headed for at least another quarter of very weak growth, Q2 could also be hit.

Real risk that business and consumer confidence will erode further, creating a more persistent slowdown.

Stresses from lower commodity prices will spread from energy-producing regions into other parts of Canada.

Declining consumer confidence naturally leads to reduced activity in housing market.

In this context, lower rates will help stabilize housing market rather than contribute to froth.

Many of the implications of coronavirus lie beyond influence of monetary policy.

Monetary policy can contribute by buffering effects of outbreak on consumer and business confidence; this contribution can be particularly powerful when shock is global, and response is coordinated.

Canadian labor market is in good health overall, continues to be source of resilience for economy.

Federal government could boost health of labor market by helping people deal with risks of relocation or make it easier for skilled workers to recertify in another province.