Governor Poloz's speech highlights the credibility of surprises

Governor Poloz in his speech today looked to address the role of central bank credibility in influencing the path of long-term interest rates and financial market volatility. While modestly dovish, he doesn't provide much in the way of signals as to future path of interest rates.

However, the more interesting part of the speech was that related to the normalization of monetary policy, as it included a spirited defense of the Bank of Canada's surprise interest rate cut in January, and the subsequent discussion by market analysts of the data dependency of future policy decisions.

He pointed out that oil prices are have been "below the assumption build into our forecast" in January but failed to point out that the economic impacts of lower oil prices will be front-loaded and that 2015Q1 real GDP growth is likely to come in well below the 1.5% annualized projection in the Bank's January Monetary Policy Report. 

Today's speech was broadly balanced and doesn't change our view that the Bank of Canada will keep interest rates on hold until the last quarter of 2016 - said TD Economics in its report