Bank of Canada Governor says economy can handle swings in resource prices

Poloz will deliver his keynote address “Riding the Commodity Cycle: Resources and the Canadian Economy” at 12:50 p.m. MST.

Energy advanced 1.66 percent, following a rally in oil prices on Monday, with the light, sweet crude for October delivery up 2 US dollars to settle at 46.68 USA dollars a barrel on the New York Mercantile Exchange.

The Canadian economy is able to deal with the challenges posed by large movements in resource prices, Bank of Canada Governor Stephen S. Poloz said today. In June, the overall economy regained momentum with 0.5 per cent growth, following five straight monthly declines in output, but still meeting the broad definition of a recession – two consecutive quarterly contractions.

The U.S. dollar also rebounded from last week’s post-Federal Reserve lows as investors digested how the Federal Reserve’s decision last week to keep interest rates steady might impact other key central banks around the world. As an example, he highlighted how the price of copper had tripled while oil and nickel more than doubled between 2008 and 2010.

Poloz repeated that the bank would “look through” temporary upward pressure on core inflation that results from a lower currency boosting import prices.

He added that in recent weeks these companies were still revising their longer-term forecasts for the price of oil.

The resource sector, he said, is still adjusting to the tougher conditions – a process he believes will take “considerable time”.

None of the volatility, however, should deter Canadians from continuing to seek benefits from the country’s resources, Poloz said.

In a speech at Calgary Economic Development’s 2016 Economic Outlook event, Governor Poloz said that it’s far better for Canada to have natural resources than not, even if swings in their prices can complicate the management of companies and economic policy.

“But our policy can help the economy adjust to them”, he said in a speech in Canada’s oil capital of Calgary, Alberta, hit badly by the steep fall in crude oil prices.