Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 19 - Evidence - April 13, 2017
OTTAWA, Thursday, April 13, 2017
The Standing Senate Committee on Banking, Trade and Commerce met this day at
10:31 a.m. to study the present state of the domestic and international
Senator David Tkachuk (Chair) in the chair.
The Chair: Good morning and welcome to the Standing Senate Committee
on Banking, Trade and Commerce. My name is David Tkachuk and I am the chair of
I am pleased to welcome back Governor Poloz and Senior Deputy Governor
Carolyn Wilkins. Our last meeting with them occurred in October regarding their
fall Monetary Policy Report.
Thank you for being here today to brief us on your Monetary Policy Report,
April 2017, which was released yesterday.
Senators, a link to the report was sent to your offices and we have copies
today, so signal the clerk if you need anything.
Governor, welcome and the floor is yours.
Stephen S. Poloz, Governor, Bank of Canada: Good morning everyone.
Senior Deputy Governor Wilkins and I are pleased to be back before you today to
discuss the bank's Monetary Policy Report which was published yesterday.
At the time of our last appearance in October, I spoke about the factors that
caused us to downgrade our outlook for the Canadian economy. Six months later, I
am pleased to say that today I can discuss the factors that have led to us to
upgrade our forecast.
For some time we have been talking about how the oil price shock that began
in 2014 set in motion a complex series of adjustments throughout the economy,
including a significant restructuring in the oil and gas sector. What we are
seeing now is that energy-related activity has stopped declining and is
transitioning to a new level that is commensurate with the current level of oil
Because that large negative force is now essentially past, it is no longer
masking the sources of strength that have been at work elsewhere in the economy
for some time, particularly the growth in output and employment that is being
driven by our growing service sector. The expansion over the past six months has
exceeded our earlier forecast, and we have revised up our outlook for average
annual growth in 2017 to a bit over 2.5 per cent. That is one half percentage
point greater than we projected in January. We project growth of just under 2
per cent in 2018 and 2019.
A crucial question for the bank now is whether the stronger economic data
that we have been seeing in the last few years is signalling increasing
momentum. Some of the strength is coming from factors that seem unlikely to
continue at the same pace. For example, the very strong growth in consumption
spending in the first quarter was supported by a temporary boost from the Canada
Housing activity has also been stronger than expected. Here we have
incorporated some of this strength in a higher profile for residential
investment throughout our projection horizon, but we still anticipate a slowing
longer term in the projection horizon.
The current pace of activity in the Greater Toronto Area and in parts of the
Golden Horseshoe region is unlikely to be sustainable given fundamentals. House
price growth in the GTA has accelerated sharply in recent months, suggesting to
us that speculative forces are at work.
In terms of the labour market, recent data have been mixed. Job growth has
certainly been firm, but both wages and unit labour costs have been growing only
slowly. The data suggests to us that material slack remains in the Canadian
labour market, in contrast with the U.S. labour market, which is close to full
At the same time, Canadian exports and business spending are still weaker
than you would expect to see at this stage of the business cycle. The companies
are telling us that while they plan to raise spending, the planned increases are
modest or tied to maintenance rather than expansion. In short, the economy is
not yet firing on all cylinders.
In addition, Canadian companies are dealing with heightened levels of
uncertainty related to U.S. tax and trade policies. We still don't know what tax
changes may be coming or when. The range of potential trade measures under
discussion is even wider now than it was in January. It includes such things as
a boarder adjustment tax, increased tariffs aimed at specific industries or
countries, non-tariff barriers, and even broader multilateral measures.
We do not know which of these will be enacted, and their timing is uncertain.
Each would affect the global and Canadian economies through a different, complex
set of channels. With all of this uncertainty, we cannot reliably model the
impact of changes to U.S. trade policy. Instead, we have built in an extra
degree of caution in our forecast for exports and investment relative to our
January projection. Total inflation has been close to 2 per cent and is expected
to dip to about 1.7 per cent in the middle of the year before returning to near
However, our core inflation measures are all in the lower half of the target
band and have been trending downward. This supports the view that the economy
continues to have significant excess capacity. Our current base-case forecast
calls for the Canadian economy to absorb its excess capacity sometime in the
first half of 2018, which is a bit sooner than we projected three months ago.
We are certainly happy to see the recent strength in the economic data and we
want to see more of it in order to be confident that growth is on a solid
footing. We judge that the economy still has material room to grow, and we
remain mindful that significant uncertainty continues to weigh on the outlook.
Given all of this, we judged that the current stance of monetary policy remains
appropriate and maintained the target for the overnight rate at one half per
With that, Senior Deputy Wilkins and I would be happy to answer the
The Chair: Thank you very much.
Colleagues, we have larger committees now. There are 13 of us here today,
including myself, so I will try to keep my comments to a minimum and let you go
at the governor. Keep your preambles short, your questions crisp and we will be
able to get to everyone. I will do the best to govern that because we will try
to be out of here by 12:15.
Senator Black: Governor and deputy governor, welcome. It's nice to see
you today. Thank you for the continued work you are doing on our behalf.
Being from Alberta, I am concerned about what I am seeing in the housing
market in Toronto, as you are as well. I am concerned about the consequences if
it is a bubble and if the bubble bursts. We have seen what happens when bubbles
have burst in the past.
Yesterday I was reading an interesting point of view expressed in an
editorial in The Financial Post which perhaps you saw. I want to quote
the end of it to you, governor, and I am interested in your comment. They are
talking about the housing bubble and what needs to be done. They have a point of
view that I want to raise for your contemplation. The paper is saying:
At the root of the interest-rate/housing-bubble conflict are fundamental
disagreements over how central banks operate. The almost exclusive
dependence on interest rates to control policy, in Canada and around the
world, could once again be fostering conditions that create bubbles and
subsequent financial crises.
Could you comment?
Mr. Poloz: Yes. I am aware of this argument. In fact, I appreciate the
If we go back to the global financial crisis of 2007-08, arguably monetary
policy was perfectly on track in the lead- up to that episode. Inflation was
under control. According to the textbook, everything should have been fine, but
financial system or financial stability risks were growing in the background.
That, of course, had at its root not just a period of calm. The way the story
goes is that an extended period of calm with steady growth and no recessions,
nothing to make you nervous, makes investors less risk-averse, so more risk
taking, and not just investors, but their financial intermediaries. That
combined with innovations in financial engineering, the rest of the story has
been made into a movie.
Senator Black: But are we going to see that movie again?
Mr. Poloz: Since that time there has been tremendous investment in the
resilience of the financial system, a complete new architecture of regulation,
much higher capital requirements and a much more resilient global system. Some
of this would be seen to be a modest Canadianization of certain aspects, because
we had a very resilient system before, but indeed there have been changes to our
own system. Most of us are more confident now that if faced with similar
financial shocks, the financial system would be resilient to it.
That doesn't mean that there aren't dangers of the sorts that you are
mentioning. What has happened in this decade is that financial stability risk
has become a key part of the policy formulation process.
Back in those days, we didn't have a Financial Stability Department at the
Central Bank. We didn't have the
Financial System Review, which has become a twice-annual publication where
we analyze in depth the sorts of risks that you are outlining. The next one will
be due in June.
There is a whole new world, if you like, built around those risks, so we go
into each policy decision with those risks also on the table. They are taken
into account, but we have to bear in mind that, as the article is trying to say,
most central bankers only have one tool and therefore one objective. Our best
contribution to this whole thing is to continue to provide a low, predictable
inflation rate so that good decisions can be made and the regulation of the
system is done by others in our collaboration. In Canada we have a highly
collaborative model on that. That assessment of risk is something that we share
around a committee table that advises the Minister of Finance when we think
there are financial risks that should be addressed.
Senator Tannas: Could you explain for the folks who are listening, and
myself, the difference between inflation and core inflation? What is stripped
out of core inflation and why is that number so important?
Mr. Poloz: I will give you a high-level answer and then perhaps Ms.
Wilkins can offer more details.
Essentially, inflation is a pretty noisy data series. Typically, almost every
country uses some version of the Consumer Price Index and they use it in a
year-over-year, like a 12-month context. Even with that amount of smoothing, it
is a highly variable series.
What happens is that to understand the underlying trend in inflation, which
is what we would want to respond to, we strip out some of the noisier things.
After stripping things out, we call it "core,'' and we have more than one
definition of "core'' to help us do the best job on this.
Carolyn A. Wilkins, Senior Deputy Governor, Bank of Canada: We have
three measures of core. Each has a different methodology to strip out the
noisiness. The noisiness is quite important; 75 per cent of the variation in
total headline inflation is coming from energy prices, which fluctuate a lot. If
you fill up your tank, you know that.
It is really important to do that. We have selected these three measures so
that they will give us an unbiased view of what might be happening to headline
inflation, the underlying inflation. We want to have something that is also
highly correlated with the fundamentals that drive inflation over the longer
run, like the output gap.
What you are seeing now with core inflation measures that are below headline
inflation, and where they have been drifting down, is just a reflection of the
excess capacity we have had over the last year. Without getting into the detail,
one of the measures is very consistent with the slack that we still think exists
today in the labour market and that shows up in very modest gains in wages and
unit labour costs.
Senator Tannas: It would be fair to say that because our gas prices go
up, it's clear, that's not something you can worry about or cure with the tools
you have. Therefore, you take things like that out. If a consumer is saying that
their costs are going up by 4 per cent because of carbon taxes, gas prices, and
so on, you have to ignore that as you do your work around trying to set an
interest rate. Is that fair?
Mr. Poloz: That is right.
Fundamentally, it takes arguably six quarters, or so, for us to have a
meaningful impact on inflation. We couldn't possibly be targeting every bump and
wiggle. We have to have a smoothing version and understand where it is likely to
be 18 months from now so we can respond to that trend. That requires stripping
out some of these things.
Of course, every individual has a different personalized inflation rate, and
it is often enhanced by media attention. You remember last year it was all about
the $9 cauliflower, but this year there were no articles about the 69-cent
cauliflower. That is the way it is. Now the articles are about expensive gas,
but two months ago there were no articles about the inexpensive gas. That is
just life. We try to see through those things and these measures help us do
They are different in the sense that they have different strengths or
weaknesses. That is why we chose to have three of them, because there is no
single measure which is perfect for all seasons.
Senator Wallin: In doing some reading for this, two things jumped out
at me that were a red flag. The surge in foreign cash in Canadian banks'
currency deposits have increased from 2.5 per cent of total financial holdings
to 7 per cent. The next fact was that foreign holdings of Canadian financial
assets stood at more than 200 per cent of GDP at the end of last year, up 140
per cent. I am assuming that this accounts for some of the investment in the
housing market on the front page of The Globe and Mail. Where else is it
Mr. Poloz: For the most part, it goes into Government of Canada debt.
It also goes into our equity market or direct investment into the oil sector.
Actually, we have had a couple of reversals there in recent months, but the
balance is decidedly positive.
In the last few months, we have detected a heightened interest in investing
in Canadian paper. Geopolitical events have made Canada look like a bit of a
haven. It is traditionally a haven of some kind, but a special haven in these
There have been growing positions in Canadian dollars in foreign central
banks and in other wealth funds, et cetera. That, no doubt, has been at least
partially responsible for a little extra firmness in the Canadian dollar not
just across the U.S. dollar but across a wider range of currency.
Senator Wallin: So you think it's positive?
Mr. Poloz: Well, I'm agnostic on it. In the sense of a response to
positive underlying fundamentals, that's a positive signal. It just is what it
is. It can ebb and flow.
Senator Wallin: On page 13 of the MPR you say that despite the fact
there are strong job gains, there is a new weakness since 2016 on actual total
hours worked. Initially you would think that's because there are more part-time
jobs, but you say this is across both part time and full time. What accounts for
Ms. Wilkins: We have a special study you can look at outside the MPR.
There is a staff analytical note that works through it.
You are absolutely right: The first places you would look, well, there is
just an increase in part-time jobs, or you would see it's because of a shift to
service-sector jobs where a lot of the jobs have been created that would account
for that as well because there tend to be fewer hours worked. In fact, it's just
really broad based. There is no answer that you can be definitive about, but
what we think is happening is this is an indication of the continued slack in
the economy. In fact, we would expect that as the economy continues to grow and
the labour market improves, those hours will go back up. It's not a structural
change in hours worked per week. However, that's something we will have to
monitor and follow closely because hours are very much related to income.
Senator Wallin: Yes, absolutely.
Senator Massicotte: Thank you for being here and for your interest in
our committee work. I would first like to talk about our relations with the
U.S., which could represent a threat for the Canadian economy. We are talking
about NAFTA and the Buy America Act, and all sorts of free trade obstacles.
However, your report does not attach a lot of importance to that. We hear that
there could be a threat. Could you tell us what impact that would have on our
economy? Is the 2 per cent growth actually 1.5 or 1.7 per cent? Canadians could
then assess the risks.
Mr. Poloz: That's a great question, but the answer is more complicated
Ms. Wilkins: Clearly, we have seen the uncertainty of the trade policy
south of the border. It is impossible to provide numbers right now, but we can
look at the various aspects where changes could have an impact on Canada and the
global economy. There are a number of options, including tariffs, non-tariff
barriers, the possibility of subsidies, but also a border adjustment tax. We
still don't know which options will be chosen, to what extent, or when. However,
we know that it will be harmful to the Canadian economy, because it involves a
number of aspects. We can suppose that there will be a drop in activity in the
sectors directly affected, particularly for the workforce. For instance, if I
lose my job in the forestry sector, I will have to find a job elsewhere.
Senator Massicotte: If we assume a 10 per cent tax on all imports from
the United States, would there be a major impact or would it be easy to adapt to
Ms. Wilkins: It depends on the circumstances.
Senator Massicotte: Let's say 10 per cent on all imports.
Ms. Wilkins: I cannot give you any numbers, but that's not good news
either for us or the U.S. Let me point out that, clearly, there will be an
impact on the demand, but also on the supply. Canada's potential growth is also
fairly significant. We have included a simulation in our update. You can
actually look at our researchers' note. If there are changes that break the
global or Canadian value chains that have been built over the years to increase
productivity, we can expect to see new value chains that will be less
productive. That will hurt our productivity rate, which is not very high.
Senator Massicotte: A severe, major blow to Canada?
Ms. Wilkins: This will be a major blow if value chains are bungled by
change. It is impossible to make forecasts because we don't know the change in
behaviour that this could cause in the manufacturing sector or in Canada, given
that they could find other markets, other value chains elsewhere in the world
that do not involve the United States. It isn't all doom and gloom. There are
ways in the future to restore our productivity rate, but we need to look at the
situation in real time. Predicting impacts isn't easy. Some scenarios are
relatively negative for Canada, but they have not yet been seen. Nor will these
scenarios necessarily happen.
Senator Carignan: There is much discussion about short-term prognosis.
Short-term forecasts are sometimes more difficult to establish than long-term
ones, given the presence of certain structural elements. What two or three major
threats to the Canadian economy are on your radar for the medium term, say five
years? Is it the aging of the population, household debt, real estate bubbles?
Steps are being taken in Vancouver to reduce the housing bubble, and it is
moving to Toronto. There has been a rise in prices in Montreal in recent months.
What are the two or three biggest threats in the medium term?
Mr. Poloz: Protectionism in the United States would be the first major
threat to Canada. As Ms. Wilkins explained, it is very difficult to make
forecasts because it could take a variety of forms. This will certainly have a
negative impact. This threat could be a severe blow to Canada. We have put this
issue on hold for now, given that it is not yet concrete.
As for the threats, this isn't the same as the negative risks. Investment in
Canada is relatively low compared to fundamentals right now. This is a matter of
concern to us.
We would like to put forward other explanations that would not be entirely
negative, including the growth of the services sector, which requires less
investment for the same level of potential growth. It's a possibility. But I
think this uncertainty comes from investment, and it's a long-term problem,
because in fact our capital is constantly diminishing and depreciating.
The other thing is the household financial imbalance related to housing
prices. It is possible that there will be a prolonged housing boom that, if
coupled with debt, would create a vulnerability that may present financial
risks. If a financial blow occurs at the same time, it can exacerbate the
effects on the economy. For the moment, it is characterized as a vulnerability,
but each prolonged period accentuates this vulnerability. These are really the
two things that, apart from protectionism, are the biggest threat.
Senator Wetston: Thank you for being here today. I would just like to
compliment both the governor and senior deputy governor on the important
international work they do. We often don't see that. Frankly, it's extensive and
it's very well-received, and they clearly have an important impact on the
international financial markets, banking in both Switzerland and at the
Financial Stability Board. I really want to compliment both of you on that
important work. It goes below the radar screen.
In that regard, I realize we're speaking of the Monetary Policy Report,
but can you provide the committee some comments on how you see the international
markets today from the point of view of how it impacts Canada? I think a little
bit about Larry Summers,who continues to talk about secular stagnation for
example. I think about rate increases being very much tied to what the fed might
do, a rate increase or two, how that might affect the Canadian currency.
You commented today, governor, on the issue of investment and the impact on
productivity. I am wondering whether you could give us a sense of how you're
seeing the global environment and how that affects Canada and some of these
matters I just asked you about.
Mr. Poloz: Thank you for your kind words. As others perhaps know,
senator, we have a past, so we have worked together on various files.
You mentioned secular stagnation. It was a hotter topic 18 months ago, even
12 perhaps. But like many hot topics, they cool off when the economic data show
up, and so very few people are looking at the U.S. economy today and
characterizing it as a case of secular stagnation.
There are still elements of the secular stagnation story which are
fundamentally true; that is, that population growth in the world is slowing.
That means that the labour available for work is slowing, and potential output
for the world is slowing down. So the slow-down that we observe is in most
respects very fundamental. One needs to have a 50- to 60- year window to
understand that. Basically the baby boom, post-war, boosted economic growth in
the opposite way to what I just described, for about 50 years. That 50-year
period, we are just coming down that slope now. That also brings with it slower
investment rates to maintain a slower growth in the potential economy. So those
things are identifiable. They are long term and there is absolutely no doubt
Now, layered on top of that is a productivity slowdown which seems at odds
with all the technology we're seeing.
So there still remains a puzzle which may end up being associated with that
secular stagnation view.
But at the same time, we know there are a number of things which slowed
economies down which have been decidedly temporary, but temporary in a longer
sense than normal. Those are basically headwinds created by the financial
crisis, stocks of indebtedness, and so on, which slow things down. Every time we
have had a recession after a financial crisis, it has taken much longer to
recover than from a typical business cycle.
All of that is to say that the U.S. and the UK are out in front of this. The
rest of the world continues to be some distance behind. Europe is showing
recovery and actually responding to negative interest rates, and so that's
positive. Japan is still in a very long period of slower growth; in fact it kind
of led us in this direction.
But in the U.S. and Canada, we think things are moving along pretty
conventionally, yet with these legacy effects I described before. What has
really made us different from the U.S. has been the oil shock. If the oil shock
had not occurred, we would be more or less in a similar situation.
The fact that our growth rate in the last little while appears stronger than
the U.S. is not at odds with this underlying story, which is that the U.S. is
basically back to full employment and Canada some way behind that, if you like.
So that means the two economies are in different situations. We call that a
divergence. That divergence is a natural outcome of an oil shock which is bad
for Canada and positive for the U.S. economy. The exchange rate moves to help
the adjustment take place. All those things have happened. So we're confident
that over the next year or so, we're seeing all those pieces coming together.
That kind of puts us back into international context in a quick fashion.
The Chair: Governor, when you talk about the long-term economy,
interest rates have been extremely low because of the 2008 recession. Is it
possible that the reason that business is not investing is because they are
uncertain about what is going to happen to interest rates? The longer you keep a
lower than normal level, people will be reluctant to invest because they always
think the future will be worse, i.e. interest rates will go up. How high? They
have no idea. Stability is the thing. Unless you tell them they are going to be
like this all the time, people will always say, "Well what happens to a 40-year
investment, when interest rates could be 9 per cent or 10 per cent or 8 per
Mr. Poloz: We do try to provide more information than that on the long
term. The next implication of having a global moderation in trend growth,
because of the demographic reasons I mentioned, the next consequence of that is
that the equilibrium rate of interest also goes down. For instance, for Canada
and the U.S., we believe that the equilibrium interest rate in these conditions
is on the order of 3 per cent, like a range of 2.5 per cent to 3.5 per cent, so
much lower than what we used to think of as a normal, steady, straight interest
rate. We have explained that to people.
That means that in the U.S., which is big on the process of normalizing
interest rates, the destination, if all goes in a subdued and regular way, will
be a much lower destination than what we saw before. That doesn't mean that
interest rates won't fluctuate in the future because of cycles in the economy
but that the average will be a lower average than we're used to.
So I think there are elements I agree with in your assessment. Companies are
uncertain. Part of that is because of what they have been through. If you're
talking to a company today, they are just happy to be here. They survived. Lots
of their neighbours did not. We lost 8,000 to 10,000 Canadian companies during
the strong dollar and then the recession period. It was mostly manufacturing,
exporting companies. If you survived that, then you did a good thing. But are
you ready to bet that this expansion we're seeing is long-lasting and to
increase the capacity of your business? That's where the reluctance comes. We
call that crushed animal spirit. It's from what you've been through and it takes
quite a while. It takes a lot of convincing for people to say yes, and it's even
convincing your board. The CEO may be ready but the board is not, so you get
We talk to companies today, and they talk about that. They talk mainly about
what might be coming from the United States. What is the future of NAFTA? If you
rely on NAFTA to do your business, well, you want to know what it will be like.
There is a lot of indication that animal spirits are stirring in the United
States. That's often contagious cross-border. As certainty grows about what the
future of NAFTA looks like, I think we'll see that general lift. In our
forecast, we're being quite conservative with investment, precisely for these
reasons. That just means that there is some upside risk if everything gets
Senator Enverga: Thank you, governor, for being here today.
You mentioned that in the last six months you upgraded our forecast, which is
great. Is this because of the recent budgetary spending? Is it any part of that,
like increasing the infrastructure spending?
Mr. Poloz: We incorporated that fiscal plan in our forecast a whole
year ago when it was first announced. That's been part of our forecast since
then. To put that into perspective, we see material excess capacity in the
economy today, and then it closes over the course of the next few quarters. It
closes sometime in the first half of 2018.
The contribution from the fiscal plan is sufficient to make that happen. If
it weren't for the fiscal plan, it would take much longer to close that excess
capacity gap. That's part of our baseline forecast, so yes, it's certainly
The main reason for the upgrade at this time has been the behaviour of the
housing market. Back in last winter, the beginning of the year, we had the new
measures put in place by the government around mortgage rules, and we assessed
that there would be some moderation in the housing market. No doubt there has
been, but you never know how high it would have been without the changes. It has
obviously surprised us on the upside.
Most of the revision for this year, which is from 2.1 per cent to 2.6 per
cent growth, four-tenths of that 0.5 per cent increase comes from faster growth
in the housing market. That means that it's higher and the slowdown is later
than we predicted but still is in there for the following years. That's the main
shock to the forecast at this time.
Senator Enverga: When you mentioned the service sector, is it the
public or private service sector?
Mr. Poloz: It's both. Health care and education, there is obviously a
blend, but IT service exports are growing tremendously. It's a sector that is a
very bright light. Tourism, as well, is an important growth sector; that's
mostly private. It's a blend of both, but it's very promising, actually.
In the IT space, these are very high-paying, software-type jobs. Any app that
you use, there are people in behind that maintaining it, putting new ideas into
it, making your interaction with that company better and stronger and more
profitable. Those kinds of jobs are growing strongly.
Senator Marshall: My question relates to the Toronto housing market,
because it is so big. There has been a lot of discussion on it and a lot of
articles in the media regarding the risk and whether it's a housing bubble and
when it will burst. Minister Morneau was in the Senate a couple of days ago, and
he discussed the issue and gave us his opinion. He indicated that he was
discussing the issue with his provincial counterparts, particularly in Ontario.
Is the Toronto housing market the issue there? Is there a risk there, or do
you think that the risk is just a vulnerability? Is there an actual risk there?
Also, the CMHC is a Crown corporation, and a lot of federal money is tied up
in it. If something negative happens in the housing market, it will affect the
CMHC and will flow through to the federal government.
How big a risk is the Toronto housing market? Is there a role there for the
bank, or is it just a matter that you're sitting and watching and maybe advising
the finance minister?
Ms. Wilkins: There are two parts to your question.
Clearly when you see prices rising in the 30 per cent range, it's difficult
even when you look at underlying fundamentals to see how those could justify
such strong house price increases, which is the reason why we were saying that
it looks like there are speculative forces at play. That's not to say that the
underlying fundamentals of the Toronto housing market don't justify price
increases. There are supply issues that are well-known; the economy is doing
very well there. We have immigration, and a lot of that ends up in Toronto at
some point. There are lots of reasons that are supporting the market. But at the
rates that we're seeing, in that context, you can wonder about the
sustainability of that pace. That's why the governor yesterday reminded people
that house prices can go down as well as up.
When it comes to thinking about what could be done, it's important to
remember that monetary policy isn't the only game in town. In fact, many
policies are perhaps better suited to deal with specific issues in specific
locations, and we know them well. Some of them were used last year in Vancouver.
That's a pretty important part of when you think about what comes next.
With respect to the second part of your question, when we think about
vulnerability, if you take the combination of really high house prices and then
people who are in that market who have taken on very large mortgages relative to
their incomes, whether that translates into a risk that crystalizes, that
matters, really depends on if prices start growing more slowly as opposed to
fall outright. If they did fall, by how much did they fall? So it's impossible
to know in advance or speculate on that kind of scenario.
What we have done in our Financial System Review is pretty clear.
Obviously, the bigger the price adjustment, the more important that will be not
only for Toronto but the potential for spillovers to other markets. If it's
combined with another kind of event that creates unemployment that is steep and
lasts for a long time, then those effects are amplified even further.
Whether that risk materializes and is important for the macro economy and for
the financial system really depends on how big that event is. It's impossible to
say. Many people try to do that in advance; I'm not willing to do that today.
Senator Marshall: Is there a role for the bank? The federal finance
minister obviously sees he has a role because he is meeting with his provincial
counterparts. I know the provincial finance minister in Ontario feels he has a
role. So everybody is talking about it, and then there is a segment of the
population that are bracing themselves, thinking something will happen and will
have a ripple effect through the economy. Is there a role there for the Bank of
Canada? If there is, what is it? Are you just watching it like we are?
Mr. Poloz: I won't comment on the last part. We are certainly watching
At the root of this, of course, it's fair to comment that the Bank of Canada
is playing a role in creating the situation. That's not to say we're causing the
Senator Marshall: I understand that.
Mr. Poloz: But the fact is that the economy was going through a very
rough period and lost 40 per cent of our exports, those kinds of things. So low
interest rates are the weapon we have to try and smooth that out in the economy.
When the oil price shock hit, one of the reasons that we adjusted so quickly
to it was because we cut interest rates to cushion the blow, and the exchange
rate moved enough to give us a more rapid adjustment than we would otherwise
have had. Those are all good things, but the side effect of low interest rates
is you're causing people to borrow more money and spend it. That's the point of
it. When they are low for a long time, more and more people borrow money.
Senator Marshall: They get confident, yes.
Mr. Poloz: So you accumulate the debt.
Yes, there is an effect there. We can measure that. It is not causing 30 per
cent increases in prices in real estate in Toronto.
If you ask yourself, well, if a speculator is buying a second or a third home
for flipping purposes, if the mortgage rate were 4 per cent instead of 3 per
cent, really would it make a difference if they are expecting a 20 per cent gain
on their money? No, it's not going to make any difference.
The Bank of Canada's interest rate policy is for all of Canada; it can't be
directed just at a certain market. You would be slowing the whole economy in
order possibly to put a dent in a speculative move in Toronto.
This is not the tool for the job. Our job is to focus on inflation and create
the kind of macro environment in which people can make good decisions. I would
say that some of these decisions being made now are not sustainable or good
decisions. As I said, I want to remind people that house prices can go down and
not just up.
For an ordinary person buying a house who loves the neighbourhood and will
stay there and it's expensive, I feel sorry for them; in that sense it's
economics. But if the price of their house went down by 10 per cent, they would
just keep paying their mortgage and some day it would be higher again.
But the speculator who owns three houses and is hoping to flip them has a
real problem. Does that have ripple effects? That's the question. How big? Does
it happen by itself or does it need a trigger?
The thing about houses is you have to buy the house, whereas in a financial
market, you can speculate just by buying futures and incrementing your position.
In the end, if you have to buy the house and it's reaching a point where the
bank simply won't finance it for you, then you don't buy the house. That's what
I think happened in Vancouver in the months before the new measures were put in
place. It actually started to slow down by itself, so it kind of reaches a
natural limit. There are checks and balances in the system.
That's more than you asked for, but there are no definitive answers.
Senator Marshall: Thank you.
The Chair: So how much oversight is there — I don't know whether you
would know that. Maybe we should be asking OSFI or someone else. If a speculator
loses money, that's too bad. If banks are extending credit limits that are too
high so that a poor guy gets a 90 or 95 per cent mortgage, then all of a sudden
there is a drop of 20 per cent in the market and he has to renew his mortgage,
he is done like dinner. Do you feel confident that the banks are being careful
in how they are — if they are getting enough down payment, it doesn't really
Mr. Poloz: That's right. We have most visibility on the insured space,
mortgages with less than 20 per cent down payment. That needs to be an insured
mortgage, and that's where the rules apply.
In that space, we know that the new rules mean you need to be much more
qualified to have that mortgage today than before the rules went into place, so
there is a cushion in there where you can tolerate a higher rate of interest and
so on because you have been tested against it.
If, on the other hand, you are in the uninsured space, then you have more
than a 20 per cent down payment. That means you have more cushion from the point
of view you're describing. That is only relevant if you need to actually sell
the house anyway. You can renew your mortgage and just stay there forever, and
the fact that the price has gone up or down is of little interest. It's cocktail
conversation, not a life-and-death kind of situation. But lots of people do have
to move, and they get caught in it.
The Chair: Exactly.
Senator Smith: I watched CNN last night, and they showed all of the
promises that Trump has made during the election campaign and that he has
changed his position. I'm wondering from an economic point of view, when you
look at the United States and your discussions with other people in business and
in government, is his bark bigger than his bite? Have you got two scenarios set
up so that the U.S. can go one way or the other? Which way do you think it will
go in terms of some of the implementations they want?
Mr. Poloz: I don't know the answer to that question.
The Chair: Watching CNN isn't going to help.
Mr. Poloz: No.
For me it's the uncertainty that matters. Even if they don't do anything,
companies are wondering and they are holding back on their investments today,
which has a long-term effect on the economy. It's slowing down employment growth
in the new sectors that would be expanding. It's prolonging all of the legacy
effects that we're dealing with. Investment could be significantly higher if
that were just cleared up one way or another. That's point number one.
Point number two, I never judge a dog's bite by its bark because even the
little ones can really bite. I think we just don't know, so we'll have to wait
I think if there is a pattern, it is in dialogue, which I would say is an
educational process. Talking to companies and understanding things more deeply
appears to be playing a positive role. As understanding deepens, then positions
get a little more nuanced and that's a positive.
I'm hoping that as we get into NAFTA, and so on, business is speaking on both
sides of the border and helping everybody understand how these things work and
how they would affect everybody. It's going to take some time. I don't see a
reason to be pessimistic about it, but I think you need to be wary.
Senator Ringuette: I'm more and more puzzled because for a number of
years we have been hearing of the billions in reserve in the major Canadian
industry. At first the reason for them not investing was because of the
financial crisis, and afterwards it was because the markets were not there. All
that time, there was no rhyme or reason in regard to the fact that because of
the low interest rate, it's certainly not to invest their cash.
It has been almost 10 years now, and they are still sitting on these cash
reserves. We have gone through a slate of, "Oh, well, it's because of this or
that.'' Now, in the last few months, it's because of U.S. uncertainty. I think
there is more to it than that. How can we find out what it is and try to unlock
those reserves to create a larger economy and greater certainty in our own
We have a brand new trade agreement with European countries. That should give
us a positive boost, yet we still have from year to year a different reason why
they are not investing in better equipment, new technology, new markets and so
forth. They are still sitting on that money.
Mr. Poloz: Right. Fundamentally, you think of the macro economy as a
single business. For simplification, you might look out the window and ask,
"What rate of return would I earn by investing in this business?'' You see year
after year of 1 or 2 per cent growth. You might conclude: That is not much of a
return on investment. It's kind of risky, too. It's not risk-free, that's for
sure, so I'm going to wait until it is a little more certain. I'm going to sit
on my cash. It's not costing me much to not invest it. I'm not getting much for
keeping it, but at least it's safer to keep it than to risk it and have, for
example, NAFTA change and disrupt my business — something like that.
I think of it in a simple way. When you go beneath the service, there are
certain sectors investing heavily. There are other sectors that may be in a
longer term slowdown, so they are not. Take the auto business, for example.
Mexico has garnered the biggest share of new investments in auto assembly and
the southern United States. Canada has not. Canada is closing auto plants.
That's almost a tectonic kind of shift. It's a very traditional, large business
in Canada. The parts business is doing great, but the assembly business has been
shrinking. Traditionally that has been an important place where normal
investment would go, and that is much less the case today.
You can kind of list things like that you have heard about. That would mean
less investment, so you have to look to new things. The fact is we haven't
reached that almost magic stage of expansion where we are creating new companies
and they are creating new products, new exports and new jobs. The
self-sustaining upward momentum has not been established yet.
The U.K. economy has resumed that kind of natural growth process and the U.S.
has. I believe we are not far behind, but it's something we have to wait to see.
Senator Moncion: My question is about the existing securitization
program. Mortgage interest rates are low. Financial institutions use the
securitization market extensively to get the financial margins they need to
offer mortgages at low interest rates. Do you have an idea of the extent of the
link between securitization and speculation in the real estate market that
contributes to the rising house prices and astronomical sums in securitization
at present? What is the causal link between the two?
Mr. Poloz: That's a complicated question.
Ms. Wilkins: The securitization program serves to improve the
liquidity sources for this market. That is why we have a program like this. It
is intended for families who want to buy a house. Obviously, there have to be
controls on the quality of the mortgages that go into those securities there.
There are fairly stringent standards that the OSFI imposes on banks and that
CMHC imposes on institutions that are not regulated by the federal government.
Guidelines B-20 and B-21 ensure the quality of mortgages in order to avoid the
problems we have seen in the United States. To the extent that this program
gives financing to people who buy for investment purposes, it could fuel that.
We must not forget that there are many investors who do not need financing and
that mortgage insurance stops at $1 million. This limits the direct or indirect
impact on speculation.
Senator Moncion: But we have seen in recent years that financial
institutions have made a lot of CMHC-insured loans to be able to securitize them
in order to get the margins that come out of CMHC and those charged to people,
Which allows people to buy houses, but —
Ms. Wilkins: It is impossible to tell the difference between demand
from people who want to live in their home and that other part. All I can stress
is that the part that might be speculative is not always financed in that way.
Often we hear that there is no mortgage, and that it is paid in cash.
Senator Wallin: You were talking a few minutes ago about the new tech
jobs particularly in the service sector, but we are also seeing the flip side of
that, which is lots of job loss due to technological replacement.
I know you have done thinking in the past — we've talked about it here — on
bitcoin, blockchain and all that. Have you done any work on Mr. Gates' proposal
that we should tax these new "peopleless'' jobs?
Mr. Poloz: Well, no.
Senator Wallin: Do you think it is worth looking at?
Mr. Poloz: It will be important for us to understand that certainly
from the point of view of how the economy actually evolves. This relates to one
of the questions we talked about earlier, which is how do you measure investment
and is there really low investment or not?
I will give you some advertising here because Ms. Wilkins will give a speech
in Toronto next week, on Tuesday I think, about technology and the displacement
Without giving it all away, do you want to give us a little preamble of the
ground that will be covered there?
Ms. Wilkins: Sure.
Clearly we are interested in productivity. We talked today about how
important that is to raising the standard of living and has been in the past.
These technological innovations are an opportunity to do that but an opportunity
that comes with a side that needs to be carefully managed by policy-makers, by
government like you, where you need to think about the transition period of the
people that are working and that are displaced and how you manage that. Also
there are the effects that could come from a polarization of incomes that we
have seen in the past.
I think the kinds of suggestions on how to change the tax system like Mr.
Gates suggests really come from that concern. Although I'm not a tax expert and
it is certainly not the central banker's job to give advice on tax, what we can
say is that if the gains that come from productivity are being given to the
owners of capital as opposed to workers, it does raise the issue about the
relative taxation of those two sources.
There are trade-offs. If you are going to make a big investment in R&D and
you have something that you need to develop to bring to market, you want a rate
of return on that, otherwise you are not going to do it. On the other hand, if
you don't distribute those returns to workers, then you have an issue with the
distribution of income. Those are the kinds of hard choices that people like you
face already and will continue to face.
The Chair: Would it not be better if we let the market govern itself?
I wonder how Bill Gates would have felt if we said maybe we should tax those
operating systems you're selling because you will lose the telephones and all
the postal workers will be replaced. This happens all the time. That, by itself,
had a huge impact on our economy. No one sends a letter anymore. Those poor
postal workers will all be gone.
Ms. Wilkins: That is a good question because you want the innovation.
You don't want to get in the way of it.
The Chair: Of course.
Ms. Wilkins: We see it in financial technologies in fintech. That is
exactly the question everyone is asking.
At the same time we know that some of these technologies and the structure of
the market, there are forces there that could lead to some market or monopoly
power. When that happens, governments tend to think and competition authorities
tend to think that maybe something needs to be done to manage that.
Again, those kinds of issues often come up with technology because that kind
of technology has a lot of barriers to entry. It's expensive to get into it and
to succeed at it. Like Facebook, once you succeed, everyone flocks there. We
call those network effects. Naturally you end up with huge concentrations and
monopoly power, and governments need to think about whether or not they are
comfortable with it. Again, that is a social decision.
Mr. Poloz: If I could add one point to this. I am like a history buff.
To me, the long sweep of history has been such that we have had no end of
The Chair: Exactly.
Mr. Poloz: All of those technological improvements have created more
jobs than they have displaced. I actually am optimistic on this. I see no reason
why this technological revolution we are in will cause us all to lose jobs. In
fact, it will create many jobs.
I mentioned examples earlier. An insurance company that creates apps to
increase your productivity while processing your various things with the
insurance company has an army of technological people back there maintaining
that one little button on your iPhone. Those are great jobs that didn't exist
before that technology came along. Well, that technology reduces productivity,
which lowers the cost of everything. And that raises the spending power that
everyone has. So that spending power goes on other things that you never thought
you ever needed and creates other jobs.
They may not be the same jobs, and our kids won't work in the same jobs we
had, perhaps, but that is why the transition is of such importance. You don't
expect the laid off oil worker to do apps on the iPhone, but the stock of
housing keeps growing and so jobs in the renovation sector continue to be a
source of strength in the economy. That is not such a giant leap, is it, in
terms of the training required to move?
It is possible to get a little overwhelmed by the night and day, "Robots will
do this,'' or what have you, and since I am older I often look at that longer
The Chair: I am with you there, and even older.
Senator Massicotte: I would like to talk about demographics. We know
that the Canadian population is aging, which means that health needs are
increasing and that more and more costs are being imposed on society as a whole.
The country will suffer from this situation within 15 to 20 years.
Statistics Canada reports that, with the exception of three Canadian cities,
virtually all regions will suffer from fewer workers, as there will be fewer
people available to contribute to society's many needs. This problem will become
even greater in the future.
This is a rather alarming fact. Productivity is always talked about as the
solution. There is also an increase in the number of workers. Statistics Canada
is categorical about the rate of immigration. The result is that the number of
workers, with the exception of three Canadian cities, is constantly decreasing.
For the past few years, we have heard that the solution is to encourage
people to work longer. Aside from people with physical limitations or learning
disabilities, much of the population can afford to work longer. Today, health is
better. For 50 years, life expectancy has increased by 10 years, and the
solution, I believe, is an active and productive population. However, as you
know, in 2016 the federal government reduced the retirement age to 65 years.
This affects not only those who receive retirement benefits, but also Canadians
who perceive the age of 65 or 67 as the normal retirement age. This has a major
impact on people's financial planning. How do we reconcile the two perspectives?
To be honest, I was happy when the government increased the retirement age to
67. Now, we are going to have to back down while the rest of the world is making
efforts to work longer and to encourage the population to work longer. What is
the financial impact of that?
Mr. Poloz: As I mentioned, there is, of course, a demographic impact
on the trend of economic potential that is growing as a result of prolonged
participation in the labour market. On the other hand, there is the immigration
rate that is fueling the process. Currently, almost half of labour market growth
is due to immigration and, within about 10 years, there will be almost zero
domestic growth. All the growth in the labour market will be due to immigration.
Age is important and can influence this trend. The only thing that is
important is flexibility. If people want to retire at age 60 or 65, that is
their choice, but they also have the choice of working until they are 70 or 75
years old. What matters is flexibility and the ability to learn new things, or
maybe to work part-time. These things improve our productivity. In my view,
government programs need to focus on this concept of flexibility.
Senator Massicotte: Thank you, Mr. Poloz.
Senator Wetston: I have two quick questions.
Governor, I think some of your comments around speculation in the Toronto
real estate market — of course I live there and feel it every day with agents
knocking on my door. You and your esteemed deputy governor have experience over
the last few years in the house financial crisis. You mentioned this in your
comments with respect to central banks and monetary policy and that everything
seemed to be okay in 2008 and 2009, but we missed something. What we missed is
we did not look into the weeds of finance to understand what was going on. I
don't need to remind either of you about credit derivatives and mortgage-backed
securities, and in Canada our own situation with ABCP, et cetera.
You talked about animal spirits, which I have heard you talk about before,
and I have also been supportive of that notion in the sense of capital markets
because bubbles often flow from exuberance and optimism and all those
characteristics. Do we need to look into the weeds of finance to get some
answers regarding this issue of speculation in the real estate markets? I don't
know whether we do or not because dampening behaviour with respect to what is
occurring would be encouraging.
My second question is probably more toward your senior deputy. She has
mentioned this before. I would like to know more about what she's doing in the
fintech sector internationally, if I could ask that question. I realize it's a
general question, but I'm quite interested in it.
Mr. Poloz: Just a few comments on looking into the weeds: We do look
into the weeds. Our FSR, which as I mentioned is in progress right now
and will be published in June, does go beyond what you call the core of the
financial system in order to dig around the weeds.
There are certain aspects, especially in the real estate sector, that we
understand less well just because the data are less available to us. It's more a
question of visiting and asking the right questions. Of course OSFI is very
interested in these things, as are our colleagues at CMHC. That is the group
that gets together to discuss these issues.
You might think or wonder if everything looks like it's all under control in
the insured space, and yet the biggest growth in mortgages in the last year has
been in the uninsured space. So you might ask questions like: How is that
occurring? That means you need at least a 20 per cent down payment and houses
are even more expensive and how, exactly, is that? We do force ourselves to
understand those things as best we can.
By the way, one of the elements is the family money seems to be playing a bit
of a role. Intergenerational transfers or loans —
Senator Ringuette: Inheritance?
Mr. Poloz: Or inheritance. That is something that is often not
discussed, yet there is a huge stock of housing that at some point will be
All those things matter and we do our utmost to bring you the full picture. I
don't have the full picture for you today, but in eight weeks we will.
Fintech — my goodness, how much time do we have, chair? Okay, a couple of
minutes on fintech, Ms. Wilkins.
Ms. Wilkins: Thank you for the question. I'm always happy to talk
I am doing two things internationally. The first is probably the largest one,
which is I'm chairing a group of the Financial Stability Board that is looking
at fintech to see what kind of issues in the future the regulators and
supervisors will face from a financial stability point of view. This is part of
requests from the G20 leaders to look into the digitalization of the economy and
what it means for growth for financial inclusion and, of course, for stability
of the financial system. It will be published in June, so we will have a chance
to share it.
One of the things about fintech is there's a lot of hype out there. There
really is. It is going to change the world or it's not going to change the
world. It covers every single sector of the financial system you can think of,
from insurance to payments to advice, robo-advice. It permeates everything. Our
goal, really, is to separate the hype from what we sensibly and logically think
might be issues for supervisors.
We are really trying not to think about all the risks, all the bad things
that might happen. To your point, chair, we should also be thinking about what
good things can come from this and how we can harvest them. If it's helping
banks having more sources of finance outside of banks, having greater
efficiencies that also involve safer systems, then that's good. If you can
include more small businesses and have more sources of financing for small
businesses, include more people in the financial system, this is all great. We
need to do it safely. There are some areas that we should think about
proactively so we don't wake up one day with a system that is in place and is
hard to roll back.
Another thing is that Christine Lagarde from the IMF has set up an experts
group for fintech to advise them on their work program, and I'm part of that
group. We are all conscious of the fact that this is evolving. We're in the
early stages and we need to do some fundamental research to understand what it
means for how the financial system is wired and how it will change the business
models of our major financial institutions like banks and insurance companies,
and how it might either make the system more stable or not. That's a big
research program that we're involved in and we're contributing to from the Bank
of Canada's point of view.
Senator Carignan: My question is on the topic of the day: marijuana
legalization. Has the Bank of Canada begun to measure the economic impact of
legalizing marijuana and its impact on gross domestic product over the next few
Mr. Poloz: I must admit that I have no analysis on this very
interesting topic. I don't know if there will be an effect on productivity.
Senator Carignan: The CIBC did a study last year that mentioned $3 to
$10 billion in production.
Mr. Poloz: Indeed, it's a new business that might create jobs. That's
something but, I apologize, I have no information about this.
Senator Carignan: It's also an underground economy that will become —
Mr. Poloz: It's possible. It's interesting.
Senator Carignan: You haven't calculated it?
Mr. Poloz: No, I'm sorry.
We'll put it on the list and take a look at it.
Senator Smith: In its budget, the government introduced innovation
increases and a focus on innovation. As you look at innovation, they've got five
or six clusters they want to focus on. Who will be the players? Will it be big
corporations or entrepreneurs? Going back to Senator Ringuette's question, will
big corporations free up some of the money they have held in abeyance and not
spent on some of these opportunities?
What will happen to entrepreneurs? We brought this question up before, this
whole issue of venture capital and our resistance over time and history to
really build a venture capital capacity in Canada.
What are your thoughts on that? Who is going to win and what will happen to
big players and small players? What about venture capital? Where do they fall in
all of this?
Mr. Poloz: That is an interesting question. I probably don't have much
to say about it in terms of the territory and the budget around helping to
facilitate the creation of clusters and superclusters. But existing clusters are
a wide mix of both really small and large companies participating. For instance,
you have new technologies spin off from BlackBerry, which end up in all
automobiles, and so you get this partnership between a really large company like
Ford and that emerging technology. So there is small and big in that example and
that is kind of the model.
A lot of the true innovation that is going on is almost on the level of
plumbing, if you like, for other business. It's a B2B model.
Even the stuff the various companies that Terry Matthews creates are all for
some miniscule piece of somebody's operation that makes a major difference and
that becomes a company that then can use that application. Having done it for
that mother ship, it can then do it for many other mother ships, small and
large, because the scale is automatic, if you can get your application to fit
somewhere in the big machinery of a large firm.
To me, one of the characteristics of a successful cluster is that it's got
both innovation and tiny or small, and the ability to scale, because the
partners are there. Whether it means drawing actual money in, that varies from
model to model.
In the middle space, where the small firms can hit a hockey stick and grow,
I'm quite excited by this creation of the business growth fund, which is
actually a private-sector initiative, but with certain rules that make it easier
to happen. It's being led by the banks themselves. That is to create an entity
that focuses on patient capital in the growth space, so it goes a step beyond
venture cap. It does not walk on venture cap's grass at all.
The venture cap space appears to be quite healthy in my sense of it. It is
healthy and doing better than, say, 10 years ago. If you think back 10 years, it
was hard to see the evidence of returns compared to the U.S. venture cap space.
We seem to be suffering from maybe a lack of financial managerial capability:
great innovations but not the business acumen to bring it to the finish line.
I don't have data, but I have a sense that things are riding a steadier path
now, and the venture cap space is actually pretty fluid. That's a fairly
imprecise but a positive observation.
When you're talking about 5 million to 10 million, that's the next step in a
growth story. That's where this business growth fund would kind of take over.
What comes with it is not just money, but mentoring so that it builds a network.
This is a very successful model in the U.K. It builds a network of mentors that
can go on board. You get an investment, and you also get in you a board member
who is a guider and a networker, which adds significantly to the success of that
Senator Enverga: I have a question about climate change. As our
country becomes warmer, there will be more access to tourists and longer access
to certain resources. Do you see any economic impact because of this? Will
climate change be part of our long-term growth?
Mr. Poloz: I don't know if Carolyn has a comment to offer. I'll offer
one from my level. You can comment if you want.
This gives and takes. It's a very complicated question because certain
businesses in Canada may have a downside to climate change; others may have an
upside, a couple of which you have mentioned.
Certainly climate-based or green technologies are a positive. We do have a
strong emergent sector there. There is a water cluster and an energy recapture
cluster, those kinds of things.
We do have companies that will capitalize well on the policies or the
private-sector response to climate change. There are growth opportunities in it,
but at the same time, there are negatives that we must bear in mind.
From our perspective, the financial sector side, in what sense does climate
change pose new or different risks to the financial system, all the way from the
obvious, such as the concept of stranded assets, which you've got lending all
against those things? There is a collateral vulnerability, but more into climate
change affecting weather and, therefore, exposure of insurance companies to more
events and those kinds of things. That's the path that most central banks are
kind of spending more energy on. How many more vulnerabilities emerge because of
From a business growth point of view, we have to wait and see how the economy
Is there anything you would like to add to that?
Ms. Wilkins: I think you covered it well. The other aspect is green
finance. There is a whole new market out there that, as a central banker, we
want to understand.
It's a global market, and that market is very different depending on which
country you are in. There is a big interest in understanding the different kinds
of markets in different countries and whether or not some international
principles or coordination might be useful so that the market continues to
function really well.
Other than that, I think you covered it all.
The Chair: Thank you very much, Governor Poloz and Deputy Governor
Wilkins. We always look forward to these visits, and your insights help us in
all our other deliberations.