Carney vows to tread carefully

Bank of Canada governor Mark Carney pledged he would resort to controversial non-traditional monetary policies such as so-called quantitative and credit easing only if absolutely necessary.

Bank of Canada Governor Mark Carney appears as a witness at a Commons finance committee on Parliament Hill in Ottawa on Tuesday.

OTTAWA — Bank of Canada governor Mark Carney pledged he would resort to controversial non-traditional monetary policies such as so-called quantitative and credit easing only if absolutely necessary.

The central banker attempted to reassure a parliamentary committee Tuesday that if he has to start printing money and risk debasing the currency, he would do so because the risk to the economy left him no choice.

“I want to be absolutely clear: the Bank of Canada has absolutely zero interest in using an unnecessary strategy,” he said.

Carney said the risk of a further economic shock remains, but he suggested the risk is small, because he believes the United States and Europe are serious about fixing their banking crisis and the measures adopted by the Bank of Canada are beginning to work.

He said last week’s decision to drop the target rate to 0.25 per cent and take the unusual move of making a conditional pledge to keep it at the lowest practical floor for a year has affected credit markets.

He said the action has resulted in lower interest rates “further out the yield curve” and improved the spread between Canada and the U.S. rates in Canada’s favour.

“We had a big impact as we expected we would,” he said.

The unusual commitment to keep interest rates so low was called “unprecedented” by TD Bank chief economist Don Drummond and was praised by all members of the House of Commons finance committee Tuesday.

But Carney got a rougher ride over his unveiling of options to expand the money supply through quantitative or increasing credit in troubled sectors through the direct purchase of corporate assets.

Increasing the money supplywas once a common feature of monetary policy, but has seldom been tried in a modern economy in conjunction with a policy interest rate at virtual zero.

Conservative MP Maxime Bernier said expanding the money supply not only risks inflation down the road, but lead to a return to the kind of cheap money conditions that triggered the financial crisis in the first place.

Carney conceded future inflation was a risk, but said he intended to use the tool cautiously and fairly.

Just Posted

City Hall Park construction begins next week

Construction to update Red Deer’s City Hall Park is set to begin… Continue reading

PHOTOS: Jazz at the Lake begins

The 16 annual event began Friday and runs until Sunday in Sylvan Lake

Photos: Lunchtime tunes on Alexander Way

Final concert of the summer

Clearwater regional firefighters in B.C.

Crew operating west of Prince George

PHOTOS: Samson Cree Nation Pow Wow

The Samson Cree Nation hosted its annual Pow Wow, celebrating youth last weekend

WATCH: Feasting at Red Deer Ribfest this weekend

Ribfest runs until Sunday at Rotary Recreation Park

Street Tales: Life is filled with unlearned lessons

There are days that I almost believe evolutionists in that we are… Continue reading

Canadians believe in immigration but concerned about asylum seekers: study

OTTAWA — Canadians are generally supportive of current immigration levels, a survey… Continue reading

Quebec announces plan to compensate taxi drivers after Uber’s arrival

MONTREAL — The Quebec government has outlined how it intends to compensate… Continue reading

Hospitals to see ‘delays’ in care after losing Saudi students, health group says

OTTAWA — The loss of Saudi Arabian resident physicians in Canada’s hospitals… Continue reading

PHOTOS: B.C. city wakes up to darkness under wildfire smoke

The rest of the province also dealing with thick haze as smoky skies continue

Death Valley worker has seen highest, lowest temperatures

LAS VEGAS — Thousands of tourists descend on Death Valley each summer… Continue reading

Banff’s Sunshine ski resort upset with proposed guidelines from Parks Canada

BANFF, Alta. — An internationally known ski resort in Banff National Park… Continue reading

Folk singer Ian Tyson cancels show due to ‘serious medical situation’

TORONTO — Canadian folk singer-songwriter Ian Tyson has cancelled his appearance at… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month