Carney says G20 must stay the course on stimulus
Bank of Canada governor Mark Carney says the G20 countries must not abandon stimulus measures too early.
To read the complete transcript of Peter Mansbridge's interview with Bank of Canada governor Mark Carney, click here.
Carney made the comments in an interview with CBC News anchor Peter Mansbridge, which will air on the main CBC network Sunday at 12:30 p.m. (local time) and on CBC Newsworld Saturday at 2:30 p.m., 4 p.m. and 9:30 p.m. and Sunday at 12:30 a.m., 10:30 a.m., 4 p.m. and 5:30 p.m. (all times Eastern.)
"We met recently, as you know, as finance ministers and governors, and it was endorsed by all finance ministers that fiscal stimulus in all G20 countries should continue," said Carney. "Because we've started on this path but we are not all the way through, and they need to stay the course."
Carney pledged to provide more stimulus if the economic downturn is prolonged. The bank rate, at 0.25 per cent, is "effectively the lowest rate interest rates can go," he said.
The Bank of Canada has taken the unprecedented step of signalling that the rate will likely stay at that level to the end of June 2010. Beyond that, Carney said, the bank is still prepared to use what's called quantitative easing — basically printing money.
Quantitative easing refers to the practice of the central bank buying government and corporate debt from commercial banks, which are then expected to use the proceeds for increased lending at lower rates in order to stimulate the economy.
'We are going to do our job' —Mark Carney, Bank of Canada governor
Still, the bank governor kept his options open.
"The question is [then] the use of proceeds of that quantitative using. Is it used to buy credit? Is it used to buy government bonds? Or is it used to buy something else?
Carney said the Bank of Canada will reassess those options the third week of October, but also raised the importance of the level of the Canadian dollar. It is up 12 per cent this year, hurting exporters and posing the threat of inflation if lower-priced imports trigger excessive demand.
As long as inflation does not appear to be a threat, Carney said, "If we have to provide additional stimulus and we think that this situation is persistent, we are going to do our job," he said.
Carney committed to watching the dollar's level and to acting if it moves away from levels that reflect the fundamental strength of the Canadian economy.
"It's the same reason we track everything in the economy, it's because of the impact it has on inflation. And we have a mandate, it's very clear as you know, to deliver two per cent CPI — consumer price inflation — over the medium term. And if dollar movements are going to materially impact that, all things being equal, we need to think about how to respond."
'There is no viable alternative to the U.S. dollar' —Mark Carney, Bank of Canada governor
Carney repeated comments that there's little likelihood of any move to replace the U.S. dollar as the world's "reserve" currency, the one used to price transactions and commodities.
"There is no viable alternative to the U.S. dollar at the moment, as a reserve currency. So it's not a question of right, but it's a question of reality," he told Mansbridge. "And I would also say that the U.S. has had to respond to a very difficult economic situation, but U.S. authorities are very aware of what they need to do to bring both of those on a path that is consistent with longer-term growth."