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Stephen Poloz may have to drop rates to zero, ex-Bank of Canada adviser warns

Continued appreciation will endanger the non-commodity export revival central bank Governor Stephen Poloz is counting on to lead the economic recovery, and will probably prompt him to join global peers in cutting the benchmark interest rate to zero, David Wolf, a former Bank of Canada adviser, said Thursday.

The Bank of Canada may cut interest rates to zero in the next six to 1 . 5 years as a rising Canadian dollar threatens the recovery, according to Fidelity Investments\’ David Wolf.

Rebounding oil prices have spurred Canada\’s currency towards the biggest rally among Number of 10 nations versus the U.S. dollar within the last three months.

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Continued appreciation will endanger the non-commodity export revival central bank Governor Stephen Poloz is counting on to lead the economical recovery, and will probably prompt him to join global peers in cutting the benchmark rate of interest to zero, from 0.75 percent now, Wolf said Thursday in the Bloomberg Economic Series Canada conference in Toronto.

\”I would not be surprised if rates here end up where they are everywhere else within the developed world, which is basically at zero,\” said Wolf, a portfolio manager in Toronto who previously worked being an adviser to former Bank of Canada Governor Mark Carney. \”I\’m not really thinking recession here but I\’m certain thinking sluggish growth.\”

The Bank of Canada next meets on May 27 to select interest rates. Wolf\’s prediction goes against the consensus calls of both economists and the market.

Economists see Poloz\’s next move as raising rates, and also have moved up their forecasts to the middle of next year from the end, based on the median estimate inside a Bloomberg survey.

Traders stopped pricing inside a second cut this month the very first time since the central bank\’s first one in January.

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