Don't overdo fiscal tightening - Bank of Canada official

NEW YORK Tue Nov 27, 2012 12:54pm EST

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NEW YORK Nov 27 (Reuters) - Countries should not go overboard with their austerity measures in the short run and rather pursue policies for gradual budget-tightening instead, a senior Bank of Canada official said on Tuesday.

John Murray, deputy governor at the Canadian central bank said most countries that need fiscal consolidation are proceeding with it.

"However, there is a risk that market forces (or legislation, as in the case of the United States) may be pushing it too quickly in the short run," he said in the prepared text of a speech he was delivering in New York.

"In other words, don't overdo it in the short run, since the fiscal multipliers are believed to be much larger than previously estimated. That said, there is a need for some countries, most notably Japan and the United States, to set out credible longer-term paths to restore their fiscal health," he added.

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