Poloz sees impact of weak oil hitting faster, threatening downside to Q1 GDP.

Bank of Canada Governor Stephen Poloz gave a pair of exclusive interviews to the Globe and Mail that were published today. He notes some spreading weakness in the economy from the oil plunge but offers little about what might be next.

"The action we took in January, in our judgment - and this is our job - was to react to a shock to maintain that confidence in our ability," he said. "I don't regret a bit of it."

The story talks about a long debate at the BOC about cutting, especially after internal models showed a semi-severe shock to the economy coming from oil.

What Mr. Poloz admits now is that the bank underestimated how dramatically the markets would respond to the surprise - swinging almost instantly from an expectation of no cuts to pricing in a near-certainty that further cuts were sure to follow.

...

"As I said in January, we have more room to manoeuvre if our assumptions turned out to be wrong. What was a surprise is how that became a consensus view that that meant we would continue to cut rates further."

The story offers insight on the inner working of the bank and the personality of Poloz. It notes that he's placed a higher priority on anecdotal evidence from business and surveys.

Here is how he views the real estate market.

"It's like if the tree in the backyard has a crack in it. You worry it's vulnerable to a storm. But if no storm happens, it goes on and on, and maybe eventually strengthens through growth. If the right storm comes along and knocks it onto your neighbor's house, you've got a problem."

In a separate interview he talked about oil and how the shock from it seems to be 'front-loaded' than believed in January. It means Q1 GDP could we weaker than the BOC's 1.5% projection but it sounds like that won't cause Poloz to cut.

"When you look at the details and sure enough, I think what we're seeing are the early effects of the oil price decline already in the fourth quarter, more than I would have expected," he said. "You can see it in consumption, you can see it in housing, you can see it in investment."

"It looks to me like it's happening a little faster and it's spreading a little faster [through the broader economy]," he said.