HIGHLIGHTS-Bank of Canada’s Carney, Macklem speak in Ottawa

TORONTO, Oct 20 (BestGrowthStock) – The Bank of Canada said on
Wednesday it would have to consider any further rate hikes
carefully, given the patchy global recovery, a weak U.S.
outlook and expected curbs on Canadian growth.

Following are comments from Bank of Canada Governor Mark
Carney and Senior Deputy Governor Tiff Macklem at a media
briefing in Ottawa:

On fiscal reform:

“Advanced economies have to fulfill their responsibilities.
And those responsibilities start with the financial reforms.
The financial crisis started in advanced economies, not in
Canada’s, but advanced economies as a group. So we’ve got to
push on with Basel III measures to address a host of other
concerns, including OTC derivatives, the use of credit ratings,
contingent capital…all issues that will be discussed this
weekend.”

“First we do what we say we’re going to do and that our
peers actually do implement these reforms. Second point (is)
credible fiscal consolidation of the medium is essential.”

On business investment:

“We had an acceleration of business investments in the
second quarter. All indicators are, including today’s wholesale
trade number, reinforcing that momentum has continued into the
third quarter. We expect it to be maintained over the
projection horizon.”

“All our discussions with major industry suggests that
Canadian business is now turning around … It needs to persist
over the horizon.”

On tensions in FX markets:

“The bank is concerned about the heightened tensions in
global currency markets. We see the possibility of that, that
combined with the ongoing and actually increasing global
imbalances, having the potential to result in a more protracted
recovery globally, which will obviously affect Canada, and a
suboptimal outcome for all countries considered.

“We are concerned about that. It is why we have invested in
the G20 framework.”

On weakness in the U.S. and a strong C$:

“Our biggest challenge is on the net export side. Surprise,
surprise, part of that is because of the persistent weakness in
the United States and the slowness of the recovery in the
United States. That, combined with the strength of the Canadian
dollar means that we really have to push through on increasing
productivity.”

On coordinated central bank action:

“Now (among) the major advanced economies and emerging
markets there’s a wider divergence about the direction of
monetary policy, the scale of accommodation of monetary policy
that’s necessary. So there’s not a simple prescription that
applies to everybody on the same order of magnitude. And so the
most credible thing, the most effective suite of policies will
be policies that are appropriate for individual
circumstances.”

“We as central banks have a very effective open dialogue
and it’s important that we understand the reaction functions of
other central banks, what they could do, and we incorporate
that into our thinking when we’re setting policy here.”

On G20 discussions:

“It’s not just about exchange rates. It’s about financial
reform, it’s about fiscal consolidation, importantly, about
structural elements … and then, finally, address with our G20
colleagues, mechanisms to enhance and timelines to enhance the
flexibility of currencies.”

On progress on FX issues:

“It may not look like we’re actually making progress
because we’re getting down into the real policy decisions. I
mean on the financial side it’s easy to see, on the fiscal side
it’s tangible; structural side there’s more work to be done but
it should become more tangible. And, this discussion which is
spilling over more into the public domain on exchange rates, is
getting more tangible as well. I think we just have to be more
relentless on this, constructive in the room, and we will
ultimately, we should ultimately, make progress.”

On assumptions of U.S. Federal Reserve measures:

“Our forecast assumes that additional monetary stimulus is
provided over the projected horizon in the United States
relative to what we had expected in July.”

“It’s not for me to prescribe exactly how that stimulus is
put in place in the United States but yes, the expectation is
for additional monetary stimulus in the United States and in
some other advanced economies.”

On net exports:

“A tougher run on the net export side which we expect to
gradually turn around over the course of the projection horizon
but acknowledging that it is a difficult external environment
without question.”

“We have marked down our forecast for U.S. growth and for
global growth and so the emphasis, the new emphasis, that
Canadian businesses, renewed emphasis I should say, on
investment on improving productivity is absolutely appropriate
and that needs to continue throughout the next several years.”

On momentum of domestic economy:

“I wouldn’t put too much emphasis on what has happened in
the third quarter. The underlying momentum in the economy is
there. It is not as robust as it was at the start of the
recovery, that’s not entirely surprising. Clearly, it has been
a little more modest than we had anticipated.”

On household debt levels:

“We are concerned about the levels of household debt in
Canada. We have made those concerns known consistently over the
course of the past year. We are going to set monetary policy
appropriate to achieve the inflation target. That’s our
mandate. We highlight in this report, and elsewhere, that in an
environment of relatively low interest rates and stable prices,
authorities broadly speaking have to be vigilant.”
(Reporting by Janet Guttsman, Jeffrey Hodgson, Ka Yan Ng,
Jennifer Kwan and Claire Sibonney in Toronto and David
Ljunggren and John McCrank in Ottawa; editing by Rob Wilson)

HIGHLIGHTS-Bank of Canada’s Carney, Macklem speak in Ottawa