OTTAWA — The governor of Canada’s central bank, who began the year on a note of surprising optimism in the face of a fierce global recession, was changing his tune Wednesday as he described a country that’s mired in the worst economic downturn in half a century.
Bank of Canada governor Mark Carney also raised eyebrows in Canada when he urged governments not to overreact in their battle against the recession — advice that appeared to fly in the face of comments made Wednesday by none other than Prime Minister Stephen Harper.
“In the coming months, there may be pressure for policy to do more,” Carney told a business audience in Yellowknife.
Such decisions need to be taken with an “eye to the scale of what has already been done,” he said, noting that it takes time for fiscal and monetary stimulus to work.
Carney said he will outline possible further economy-boosting measures to get more money into the financial system in three weeks, but he stressed that should not be interpreted as a signal the bank will go ahead with so-called quantitative easing.
That’s a technical term for the central bank printing more money or buying bonds and other assets to pour billions of additional dollars into the economy to free up credit markets and encourage companies to invest and expand and consumers to spend.
In a question and answer segment following the speech, Carney was more direct in his warnings, particularly to foreign governments meeting at the G20 conference in London.
“People need to be careful about doing too much, too soon, relative to their fiscal capacity,” he said.
The comments come a day after the Organization for Economic Co-operation and Development suggested that governments, singling out Canada and Germany, should do more to try and arrest the worst economic meltdown since the Second World War.
And they appear at odds in tone to Prime Minister Stephen Harper’s initial message Wednesday to G20 leaders meeting in London, where he said the dangers of “under-acting” are greater than piling on too much stimulus.
“I think, if anything, leaders should over-act at this point,” Harper said in an interview with CNN.
Carney, who has faced considerable grief and second-guessing for appearing to be relatively rosy in his last official forecast in January, took steps to get more in line with other forecasters in the speech, toning down his expectations of recovery.
The central bank governor now says there’s no question the world economy is falling at the sharpest rate since the Second World War and is in the throes of a crisis in confidence.