HIGHLIGHTS-Bank of Canada governor speaks in Ottawa

TORONTO, April 22 (BestGrowthStock) – The Bank of Canada laid the
groundwork for hikes to record low interest rates on Thursday,
and said it was time to start withdrawing some of the
unprecedented monetary stimulus that helped pull Canada out of
recession.

Below are additional comments from Bank of Canada Governor
Mark Carney’s appearance in Ottawa:

ON BANK CAPITAL STANDARDS

“There is a need for unanimity on the basics of bank
capital standards and the basics of bank liquidity standards.
That’s a process which will not be decided this week, it’ll be
discussed this week but it’s running through a separate stream
and should be resolved in time for the Korean summit in
November so there’s absolutely a requirement for minimal common
standards in those two important areas. With respect to bank
levies, different countries are going to go different ways…
So there are different approaches and I would say that I fully
expect that one of the differences will be that there will be
countries, such as Canada, that do not introduce a form of bank
levy coming out of this process and so what we’re working
through is ensuring that some of the package makes sense.”

ON PRODUCTIVITY

“The issue is that we’re going to have to do some things to
get the economy growing at that level by 2012. Right now we
have a fair bit of slack, as I just said, in the economy. We
have some unused capacity, we’re going to start to use that up,
put more people back to work, use up spare capacity in
industry. But we have some big drags on our economy. The
demographic profile, this is where it starts to bite, starting
from now effectively, and we certainly see it from 2012 on,
which will increasingly be determined by our productivity
performance which we’ve commented recently and noted has not
been strong. We are projecting a pretty sharp recovery in
business investment this year, next year, which is going to
yield an improved productivity performance. We have
productivity growth in 2012 at 1.4 percent which if you compare
to what’s been happening in past years is a substantial
acceleration. We’re going to need that to achieve that level of
growth. So this is in the hands of the private sector who want
to grow faster. We’re going to have to grow smarter and work
smarter, invest better, build new markets, and that remains to
be determined.”

ON ECONOMIC, INFLATION OUTLOOK

“What Canadians can expect this year, next year, over the
course of 2012 and beyond is that the Bank (of Canada) will
continue to manage policy appropriately to achieve a low,
stable, predictable level of inflation, as per our mandate.”

“The Canadian economy has strengthened, we have marked-up
our forecast, we have taken appropriate steps in terms of
adjusting our policy stance, but I would underscore what is
clear in the report is that there are considerable risks around
the (global) economic outlook.”

ON GLOBAL BANK LEVY PROPOSAL

“It is important to focus on the highest value added or the
highest return elements of reform, which for us is more and
better capital, better liquidity standards and better
resolution mechanisms for institutions that fail.”

“We see the bank levy discussion as a distraction from that
core agenda.”

ON THE HOUSING MARKET

“We see a marked weakening of housing activity in Canada.
One of the elements, when we talk about the profile for growth
in 2010, we make an important point that we have seen some
activity that has been pulled forward notably on the housing
side. There has been a variety of factors behind that, the low
level of borrowing costs are certainly part of it, the
potential introduction of HST and other dynamics.”

“So there is a variety of reasons to expect that(the
housing market) to slow. We do have it slowing over the balance
of this year and that is embedded in our projection.”

IS MARKET CORRECT IN ASSUMING JUNE RATE HIKE?

“Next question.”

ON CONDITIONAL RATE PLEDGE

“It’s important to go back and recall the commitment was
put in place as an exceptional policy measure. It was an
unconventional policy measure … once we got rates to as low
as they could go at this time last year we had options in terms
of what to do to provide additional stimulus. Some central
banks around the world chose to quantitative ease or to credit
ease. We felt it was appropriate for Canada to provide this
additional guidance. But that’s an unconventional policy for an
extraordinary time. That extraordinary time is now passing. The
appropriateness of that policy has passed so we took the
decision on Tuesday to remove it because that guidance was no
longer appropriate.”

ON THE C$

“What we do in our forecast is we use an assumption, not a
projection, of the currency and the assumption where the
currency is trading now for this forecast is based on its
average level over the course of last month. More precisely,
we’ve used 99 cents.”

“Certainly, the currency moves with a variety of factors
including our terms of trade, relative growth profiles, current
account outlooks, the fiscal outlooks and realities…”

Investment

(Reporting by Ka Yan Ng, Janet Guttsman, and David Ljunggren
in Ottawa; Claire Sibonney, Jennifer Kwan and Euan Rocha in
Toronto; editing by Jeffrey Hodgson)

HIGHLIGHTS-Bank of Canada governor speaks in Ottawa