BoC's Poloz: "Increasingly confident" economy will need less monetary stimulus over time

Delivering his prepared remarks before the Canadian Club Toronto, Stephen S. Poloz, the Governor of the Bank of Canada, said that he was 'increasingly confident' that the economy would need less monetary stimulus over time.

Key quotes (via Reuters)

Economy has made tremendous progress over last year, is running close to full potential; inflation seen at around 2 pct later in 2018.

Current policy setting clearly remains "quite stimulative".

Mechanical approach suggests monetary policy should already be less stimulative; bank though is in "data dependent" mode, looking at risks to inflation forecast.

Upside risks to inflation forecast are posed by economy operating at near capacity, fact growth seen continuing to run above potential.

Downside risk to inflation forecast is slack in labor market.

Economy right now is at the "sweet spot" of economic cycle.

Encouraged by signs of higher wages, increased labor participation by youth; will take time for these signs to become trends.

Seeing signs of fundamental rotation away from housing to exports and investment.

New mortgage rule changes will mean less growth in housing sector; says high levels of debt will make economy more sensitive to rate hikes than in past.

People using home equity lines of credit to speculate may be adding to overall vulnerability of system; also cites increase in low-ratio mortgages with risky characteristics.

Although exports have not been stellar, bank expects they will continue to be pulled along by rising foreign demand.