By Alexandre Deslongchamps and Greg Quinn
June 23 (Bloomberg) -- Bank of Canada Governor Mark Carney said his country’s recession is now as deep as in the U.S., according to a person who heard his remarks today in Washington.
Carney, 44, spoke at the Woodrow Wilson International Center for Scholars. No cameras or recording devices were allowed at the event, according to organizers.
Carney left the bank’s benchmark rate at a record 0.25 percent on June 4, and pledged to keep it there until June 2010 unless the inflation outlook changes, because of a buildup of spare capacity in the economy. Carney said today financial market yields reflect the bank’s commitment.
Carney said as recently as June 18 the bank could still create dollars and buy assets such as government bonds to stimulate the economy if needed, a situation it doesn’t anticipate. Carney reiterated that comment today.
The world’s eighth largest economy shrank at a 5.4 percent annualized pace in the first quarter, Statistics Canada said June 1, the most since 1991. Gross domestic product will shrink 3 percent this year, the central bank predicts. That would be the biggest drop since 1933, according to Statistics Canada.
The U.S. economy shrank at a 5.7 percent annual pace in the first quarter.
Carney told the audience of about 100 people that the Canadian economy may grow twice as quickly as the U.S. economy in 2010.
Commentary: Several issues are developing with the Bank of Canada in my view:
- Quantitative Easing is "not anticipated" but is still on the table as an option
- The economy is shrinking at a rate faster than anticipated
- The B of C "anticipates" the economy will grow faster than the US economy in 2010
Seem like the word for the day is anticipated.
I am struggling to understand how the B of C comes to these conclusions. There is strong evidence that central bankers have acting in a coordinated way to reduce interest rates in a Kenysian attempt to re-inflate the economy and now they are heading down the QE (money printing) path to try to out wit the bond market and keep rates down. I wonder how long the bond market will be fooled?
Furthermore, how can the export dependant Canadian economy expect to substantially out perform the Americans considering that 1/3 of the value our economy is linked to US exports?
Perhaps what Mr. Carney meant was that the US will grow at 0.1% next year and Canada will grow at 0.2% - Twice as fast!