HIGHLIGHTS-Bank of Canada Governor Mark Carney

Thu Apr 18, 2013 1:06pm EDT

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WASHINGTON, April 18 (Reuters) - The following are comments from Bank of Canada Governor Mark Carney, speaking on the global economy and financial reform at a Thomson Reuters Newsmaker event on Thursday in Washington. Carney is scheduled to become governor of the Bank of England on July 1.

Carney is in Washington this week for Group of 20 meetings and the spring meetings of the International Monetary Fund and World Banking.

ON THE FED'S GUIDANCE:

"It helps market participants understand not exactly the timing of adjustment of interest rates but the minimum conditions before the Fed even thinks about adjustment of interest rates."

ON EXIT FROM UNCONVENTIONAL MONETARY POLICY:

"The tools are there. It hasn't been done before so I think there's a need for humility around it and an appropriate caution there.

"It can also, as appropriate, influence the continued path of unconventional policy. If there is a prospect of an exit, if the timing of the exit becomes more clear, it obviously influences the path, magnitude and composition of unconventional policy. At least those are considerations that need to be taken into account by relevant central banks."

CANADIAN HOUSING MARKET:

"We see valuations in the housing market as being quite firm and very firm in some markets. We are seeing an adjustment in those prices and we are now seeing household debt levels stabilize, albeit at high levels. But things are moving in the right direction, including on the new build side, on the housing starts side."

GROWTH IN HOUSING DEBT IN CANADA:

"We have conducted monetary policy in, we think, a pretty transparent way that has highlighted the risks to this, and the potential consequences for the path of interest rates. In other words, they could be higher sooner if this isn't addressed or this isn't adjusted in a more timely way."

U.S. ECONOMY:

"The important development, in our opinion from the course of last 12 months or so, is that the quality of private-sector growth in the United States has picked up ...

"The U.S. is moving towards that class of advanced economies that has well-functioning financial systems, private credit is growing now and where there is reasonably solvent investment growth."

CREDIT GROWTH:

"We do think the U.S. economy, the underlying private side, has sustainable momentum. There's talk about the fiscal noise but there is sustainable momentum. That has an implication for Canadian exports."

"Solid growth there, the fact that there is a lot of cash ... on Canadian balance sheets, the financial system is wide open and there is real opportunity to enhance productivity building in markets etc, all of that we think is going to kick in to having some of that money put to work."

ON REINHART, ROGOFF RESEARCH:

"I haven't audited the now famous spreadsheet but others have, apparently. I think what's important is to recognize that the depths of the insights by Reinhart and Rogoff's work, which capture a number of dynamics that have come to pass for countries coming out of major crisis. In our analysis and forecasting in what would happen in the U.S., what would happen to the euro zone and other places, we did rely and use their work as a sanity check on our forecast. The element that wasn't relevant, at least in our view, was exactly the issue that people are focused on, which is this 90 percent to GDP component; it's more the time it takes to repair private balance sheets."

HOW MUCH DEBT IS TOO MUCH:

"Obviously there's a limit, I won't get pinned down on the exact limit."

"One of the things that we are due to be discussing ... at the G20 this weekend is what are the long-term fiscal anchors."

"I would say that from a Canadian perspective, given our overall fiscal situation, we feel pretty comfortable that we are on the right path to a sustainable situation."

WAS CYPRUS A GOOD PRECEDENT?

"Bail-in broadly speaking, not bail-in as it was performed a couple of weeks ago in Cyprus, but bail-in as a component of addressing systemic risk ... is an absolutely necessary element, it doesn't solve everything but it's absolutely necessary."

FISCAL AUSTERITY:

"If we want to talk about ultimate sources of growth, sustainable fiscal policy is a necessary condition ... Sustainable growth comes from the private sector, not from the IMF, Bank of Canada or anyone else."

"Central bankers take fiscal policy as given. Treasuries take monetary policy as given. That's the separation and I'm not going to wade in positively, negatively, neutrally."

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