June 21, 2012 / 4:25 PM / 7 years ago

HIGHLIGHTS-Bank of Canada's Carney speaks in Halifax

June 21 (Reuters) - Below are key quotes from an appearance by Bank of Canada Governor Mark Carney in Halifax, Nova Scotia:

ON THE STRONG C$ AND EXPORTS

“It’s a question of re-centering, if I can say that, on markets that will be more and more important, that’s to say emerging markets. The problem here in Canada, in terms of exports - at the bottom of it - it’s not a question of the level of the dollar, but rather it’s a question of the weakness of our traditional markets, especially the United States.”

ON THE BANK OF CANADA’S 2012 GROWTH FORECAST:

“Since our previous forecast in April there has been a further slowing of global activity, including marginally in the United States, and the first quarter was somewhat weakened so just arithmetically what that means for 2012 growth in Canada would on the margin be down. But we’ve got to look through to 2013-2014 all in an environment ... (of) considerable global uncertainty given events in Europe.”

ON NEW MORTGAGE RULES:

“The Bank has said, and emphasized in recent months, that the number one risk, domestic risk to the Canadian economy is the potential for household finances to evolve in an unsustainable fashion, and that would have ... deleterious effects on the economy once the full burden of those debts were realized, in other words in a more normalized environment. So that’s the number one risk. These measures reduce the number one risk, domestic risk to the Canadian economy.”

“These are appropriate, they’re prudent, they’re timely, and they will contribute to, along with other measures that have been taken, they will contribute to reducing what is the number one domestic risk in our economy.”

ON IDEA MORTGAGE MEASURES EQUAL 1 PCT MONETARY TIGHTENING:

“No, is the short answer. And I’m not going to go into great detail except to draw the attention that we’re looking at different issues. These measures are to ensure the sustainable evolution of the Canadian housing market and, importantly, finances of Canadians. These are issues that are first and foremost financial stability issues and so these are measures that are very well suited to specific vulnerabilities, specific risks in the Canadian economy which relate first and foremost to financial stability. And I’m not going to be pulled into a monetary policy discussion which is targeted at price stability.”

ON COORDINATION AMONG FEDERAL BODIES ON HOUSING SECTOR:

“We’ve always cooperated (and had) open discussions about potential vulnerabilities in the sector and potential measures that could be taken. As you’re aware these measures, which we do very much welcome, are the fourth in a series of measures that the federal government has taken, which we think had been both appropriate and timely.”

ON THE EUROPEAN DEBT CRISIS

“This is our problem too, we’re in an open global system. We felt the implications of what was going on in Europe. Over the course of the last four years we’ve had ebbs and flows of this, and we’ve felt it from time to time. I know from speaking to a number of business people here, even over the last 24 hours, it comes up as a major issue in people’s decision making, the uncertainty there, and we certainly have a risk of financial spillovers if things were not to evolve as they should.”

“So the question is how to most constructively play a role and sometimes the best way to play a role is to push and put hard truths to your friends and help them recognize the scale of the problem and what needs to be done. At the same time, we’re working to objectively help devise some solutions, both in the short and longer term, through a variety of channels. The central bank channel is a very objective, evidence-based, even-keeled set of discussion, as you would expect. We have very intense financial cooperation with the Europeans, including major swap lines between the Bank of Canada and the European Central Bank, which could help provide liquidity and other things if that was necessary.”

ON EUROPEAN LEADERSHIP

“We are encouraged, I am encouraged, by the seriousness with which European leaders are taking the situation. The scale of potential measures that are under consideration, the increased understanding of the timeline and underlying drivers of the issue and one just has to recognize that we’re dealing with 17 sovereign nations who are making very, very big decisions in a very short period of time. So I’ll leave it at that.”

“It’s a mistake to underestimate the resolve of European leaders to address these issues.”

ON FLEXIBILITY IN THE EU:

“A number of these economies have to get much more flexible, even more open, because they’re going to be in a system, even if with some form of fiscal union where they have to make the kind of adjustments that are made every day here in Atlantic Canada, northern Canada and Western Canada in order to rebalance our economy, because productivity rates are shifting all the time in our economy as well. And so there’s got to be a reaction to that, and that’s what you’ll need to see in Europe as well. And without changing the institutional structure there they won’t be as flexible as they need to be.”

ON AN EU BANKING UNION:

“I think that in order to have, and I’m not alone in this, it is a view that would be shared by most of if not all of the principals in Europe, by which I mean heads of state and central bankers, that to have a durable monetary union it does require first a banking union, which is what’s being discussed right now. That’s necessary.”

ON AN EU FISCAL UNION:

“It will likely require some form of fiscal union, but it’s impossible politically, or inappropriate politically to have a form of fiscal union by the back door. That requires the political imprimatur and the clear political decision in order to build that fiscal union.”

“And part of what is so challenging and difficult about the adjustment, it’s not the will to do that, but it’s the sequencing of these various measures.”

ON QUANTITATIVE EASING:

“I would say that the evidence from the U.S., the evidence from the U.K., to some extent from Switzerland where they’ve done in it in a slightly different way but the same concept, has been that these policies are effective. They do provide additional stimulus. Calibration is always an issue and in the fullness of time one always has to look at exit issues as well. But they are effective.”

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