Oct 24 Below are key quotes from an appearance
by Bank of Canada Governor Mark Carney in Ottawa:
ON INTEREST RATES
"The case for adjustment of interest rates has become less
imminent. But it is important to recognize, for both Canadians
and then the subset of Canadians that are market participants
and then broader global market participants, that given the fact
that the Canadian economy is operating with a very small output
gap, given that we are in an expansion, not a recovery, which is
relatively unique in advanced economies, and given our outlook
for albeit moderate global growth, the implications of that for
our terms of trade and the outlook for Canadian growth and
including in all of this the potential evolution of imbalances
in the household sector, that over time rates are more likely to
go up than not."
ON WHETHER CANADA IS AT TIPPING POINT BECAUSE OF HIGH
"We don't think that. That's certainly not our base case.
Our expectation is exactly what you said. There will be this
gradual adjustment in the pace of accumulation of household
debt. That's one of the things that impact both the level of
activity in the housing market and consumer expenditure. And
that this adjustment will proceed in part, because of the
measures that have been taken. That is our base case. There is
obviously a risk that the adjustments could be more severe.
We've outlined clearly that that is a risk. But that is not our
ON CHALLENGE OF LOW INTEREST RATE VS HOUSEHOLD DEBT:
"Without question it's a challenge. Because of global
headwinds, there is a need to provide stimulative monetary
policy in Canada, to encourage business investment and to
encourage household borrowing for those households who can
afford to borrow and afford to borrow over the long cycle of
interest rates and also to take into account global pressure."
"One of the consequences of that, are these risks around
household debt and ... the first best response to that is to use
other instruments in order to ensure that a subset of Canadians
does not take the current situation and get themselves
over-extended and effectively into trouble."
ON MONETARY POLICY GUIDANCE:
"To draw more precision out of it than that is false
precision at this stage because there's a number of factors. The
world is a big uncertain place. There's lots of volatility
there. We discussed at some length the situation in the
household sector which as I say has some mixed signals on where
the adjustment is going and there's always events in economies
and we're going to adjust accordingly."
ON MEASURES TAKEN BY EUROPE:
"In terms of containment of the crisis in Europe, the
measures taken by particularly the European Central Bank with
the OMT (Outright Monetary Transactions) program, some other
measures taken by European authorities, have reinforced the
probability that the crisis will be contained."
ON CHINESE GROWTH:
"We had expected a relatively marked slowdown in China. The
question was where growth was going to stabilize, at what level
growth was going to stabilize. I don't want to overplay it but
there are some signs of growth stabilizing at these levels."
ON THREAT OF U.S. FISCAL CLIFF:
"We're no wiser on the fiscal cliff than anybody else. The
real negotiation discussion of this will start after the U.S.
election. It is a major issue. If mishandled, the U.S. will be
pushed back into recession. I think the parties know that."
ON FOREIGN INVESTMENT:
"Canada is an attractive investment destination. And our
challenge is how we use that capital which comes into Canada and
how we channel it most productively. I wouldn't overplay the
ON LIBOR AND REVIEWS OF REFERENCE RATES:
"Probably, over time, I would expect that, and these are
decisions for market participants, adjustment in terms of the
reference rates that participants use and how they use them."
ON HOUSEHOLD DEBT:
"The measures that the government has taken has been both
prudent and timely. The cumulative effect of those measures has
not been fully been felt. So we with others are monitoring the
impact of those steps."
"Monetary policy can play a complementary role, it's not the
first mover in any of this. I would emphasize that our view on
the risks in the household sector, writ large, that those risks
are very much to both sides, given the stretched position in
both the housing market and some household balance sheets. And
we're monitoring the situation closely and we'll adjust.
ON HOUSING MARKET:
"There are signs of softening in the housing market. We see
that in resales, for example in some valuation adjustments but
at the same time, on the upside, housing starts remain above
demographic demand, or household formation said a different way.
So there are mixed signals."
ON USING MONETARY POLICY TO ADDRESS HOUSING MARKET:
"As you know the government has taken steps on four
different occasions to tighten mortgage insurance rules. We
think those measures are having an impact and in conjunction
with the measures that have been taken with OSFI (Office of the
Superintendent of Financial Institutions), we along with other
federal authorities are watching the situation closely,
monitoring the situation closely ... What we've tried to be
clear about, not just in this monetary policy report but in
prior communication speeches and in fact in our inflation
control renewal document at the end of last year, is that
monetary policy if it has a role to address these issues is the
last line of defense."