| Vancouver Sun |
Monday, February 18, 2008
VANCOUVER - Newly minted Bank of Canada Governor Mark Carney, in his first official speech Monday in Vancouver, carefully avoided straying from recent bank statements about the Canadian economy and instead talked about the growing force of globalization.
On the domestic front, Carney, speaking to a joint B.C. Chamber of Commerce and Business Council of B.C. audience, reiterated the bank's opinion that the U.S. economy will slow in 2008 and gradually recover after that.
He added that the Bank of Canada may need to respond with further cuts in the bank's key overnight interest rate, which stands at four per cent, beyond the quarter-point reductions in December and January.
"As I said recently, the timing and degree of that stimulus will be determined at future fixed announcement dates after we have conducted a thorough analysis of, and applied our judgment to, all information available to us at that time."
Carney, during a news conference, added that Canada will feel effects from the tightening of credit markets in the slowing U.S. economy.
However, he added that the Canadian economy is still in a position of "operating above its production capacity," largely because of strong domestic demand.
In his speech, Carney said domestic demand is being supported by increasing Canadian real incomes, which stem from gains in Canada's terms of trade with other countries, which in turn has been driven by globalization.
"The evolution of our terms of trade will depend importantly on demand from major emerging markets," Carney said.
"The impact from our terms of trade is one factor that could lead to stronger domestic demand growth than we had assumed," which will be a development the bank will "continue to watch closely."
Generally, Carney said Canada has "adjusted well" to big swings in its terms of trade while enjoying the benefits of globalization.
"The challenge for policy makers is to ensure that the benefits of globalization are maximized and widely shared," Carney added. "From the Bank of Canada's perspective, our challenge is to understand the various ways in which globalization affects both financial stability. . . and inflation."
depenner@png.canwest.com