Canada's finance minister says economy can grow with strong currency

NEW YORK (Reuters) - The Canadian economy can continue to be successful even with a strong currency and higher interest rates, Canadian Finance Minister Bill Morneau said on Tuesday.

Canada's Finance Minister Bill Morneau arrives for a news conference in Ottawa, Ontario, Canada, July 18, 2017. REUTERS/Chris Wattie

The Canadian dollar’s “current level” is a reflection of the strength in the economy, Morneau said in a Canadian fixed-income conference sponsored by Bloomberg News in New York.

“We can continue to be successful at that level,” he added. He noted though that the government should continue to invest in productivity and infrastructure.

Morneau’s comments echoed remarks he made on Sept. 12 in an interview with Reuters.

The Canadian dollar has surged more than 8 percent against the U.S. dollar so far this year, bolstered by two interest rate increases amid an economic performance that has put Canada at the top of the G7 pack.

In mid-afternoon trading, the Canadian dollar was up against the greenback, which was down 0.2 percent at C$1.2347.

A Bank of Canada policymaker said earlier this month that the central bank will pay close attention to how the economy responds to both higher interest rates and a stronger Canadian dollar.

Morneau also said he was not worried about higher interest rates as well. Just like a robust Canadian dollar, higher interest rates were a result of strong economic performance, he added.

Canada’s economy grew at its best pace in nearly six years in the second quarter amid robust consumer spending and energy exports. Gross domestic product grew at an annualized 4.5 percent, making for the best pace of growth since the third quarter of 2011.

Morneau, however, said despite Canada’s tightening, interest rates are still at historically low levels.

Asked about the budget deficit, the Canadian finance official pointed to a positive trend. He said the government has exceeded expectations, noting that the current budget deficit was less than 1 percent of GDP. That was lower than expectations of a budget gap of about 1.5 percent of GDP, he said.

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Leah Schnurr in Ottawa; Editing by Lisa Shumaker