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TORONTO, July 22 (Reuters) - The Bank of Canada cut its growth forecasts for each quarter of 2010 on Thursday, warning global economic uncertainty and cooling domestic consumption will dampen the recovery.
Noting that the global economic recovery was "proceeding but is not yet self-sustaining", the central bank cut its second-quarter annualized growth forecast to 3 percent from 3.8 percent. It also cut the third-quarter forecast to 2.8 percent from 3.5 percent and the fourth quarter to 3.2 percent from 3.5 percent.
Following are comments made by Bank of Canada Governor Mark Carney in Ottawa after the release of the central bank's revised forecasts:
"Risks around the projection are elevated and there is no preordained path for interest rates in this country. We've taken recent decisions to reduce monetary stimulus. I've just outlined them and we will continue to conduct monetary policy in a manner appropriate to achieve the 2 percent inflation target over the horizon."
"The situation in Canada is that financial conditions are extremely accommodative, in part because of very accommodative monetary policy but also because of the strength of our financial system. Business balance sheets are in excellent shape, really unprecedented, coming out of a recession.
"The need to invest is clearly there because of international competition because of domestic expansion now and needs to expand capacity, and also the need to increase productivity in this country. So all the conditions are there. It has been remarkably subdued over the course of the recession and the early stages of the recovery. We do expect that to turn around, and we outline that the degree to which over the course of the report."
"We have made a modest downward reduction to the outlook for growth in Canada, we have made a very modest adjustment of the United States and for the global economy, again, a very modest adjustment, those are obviously linked ... There are risks both on the upside and downside but I would say given the profile of growth in the 3 percent area both in Canada and in the United States, that the prospect of that (a double dip recession) is very low."
"Our projection for the United States is slightly weaker than the central tendency of the Fed."
"It is fair to say that this is a crucial time in the U.S. recovery because we're entering into the quarters where very substantial fiscal stimulus starts to fade and in order to maintain the momentum in recovery there is the need for the pick up in private demand, most notably household consumption."
"(U.S. Federal Reserve Chairman Ben Bernanke) used the expression 'unusually uncertain.' I would equate them. And so, we've taken out the risks through some very important measures over the last few months ... of a very bad downside. But around our base case, the risks are elevated.
"There are upside risks as well. These are not just downside risks. There could more momentum in Canadian consumption than expected. There is a lot of momentum in the global economy at this moment and that momentum could persist more than we have in our base forecast."
"One of the risks (that) was realized which was the sovereign risk, the risk around sovereign debt and the response to that, both from European officials and a variety of measures that have been taken in Europe and also the G20 leaders' summit .... Those responses took out the severe downside risk from sovereign debt, so the real tail risk has been taken out."
"We don't expect a sharp uptick in household savings in Canada. Again, that is one of the risks to the projection that there could be a repair of household balance sheets, or an increase, I should say, in household savings in Canada. All of that said... household balance sheets in Canada are in quite strong shape and that is one of the big differences between Canada and the United States."
"Obviously, debt can't grow to the sky and we have consistently brought to Canadians' attention and to financial institutions' attention the fact that rates are extraordinarily low, that won't always be the case and people and financial institutions should manage their affairs such that individuals can carry debt and far more normal costs of interest."
"The profile of housing activity in the country has been consistent with what we had thought since April and that in and of itself is consistent with a view we had had, which is that the combination of fiscal measures, notably the home renovation tax credit and very accommodative monetary policy, including the conditional commitment, had encouraged residential investment to be brought forward."
"On the net export side, there's a couple of factors driving the greater contribution to growth ... first is a slightly weaker assumption for the Canadian dollar. There has been a move down in the currency."
"The assumption that we put in the MPR is a mechanical assumption. We look at the averages over the recent period and take, mechanically, that average and use it as the assumption for the currency so it's not a comment on fundamentals."
"The agency has an excellent reputation ... it's the preeminent statistical agency in the world. It's in that context that people would evaluate the quality of the data. We will look at the impact of any changes on the quality and reliability of the data that we use and act accordingly.
"We do not use the raw data per se from the long form, that is, those are inputs into a variety of other series that are developed by Statistics Canada. We will have to evaluate in the fullness of time, along with Statistics Canada, the impact that any proposed change would have on the reliability and the quality of that data."
"It is important to stress that ... we have an inflation target and we don't have a target for a neutral interest rate, and we are going to adjust interest rates to achieve the inflation target and those adjustments are going to have to reflect the head winds and the tail winds of the economy." (Reporting by Ka Yan Ng and Louise Egan in Ottawa; Claire Sibonney, Jennifer Kwan and John McCrank in Toronto)