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

Two contentious Red Deer land rezonings are moved ahead by city council

Gunn Street and 51 Street land rezonings discussed

Open house on proposed addictions treatment centre to be held at former Red Deer nightclub

Community is invited to learn more about the $2-million project on May 2

Sri Lanka expats wait to reconnect amid social media block

NEW YORK — Viji Devadas hasn’t heard from her nephew in Sri… Continue reading

US expands probe into air bag failures to 12.3M vehicles

DETROIT — U.S. auto safety regulators have expanded an investigation into malfunctioning… Continue reading

New study suggests oilsands greenhouse gas emissions underestimated

New federal research suggests greenhouse gas emissions from Alberta’s oilsands may be… Continue reading

Oh, yes! Nurse, Raptors look to finish series with Magic

DENVER — In response to an early call, Toronto coach Nick Nurse… Continue reading

Delay of game calls, goalie interference top worst rules for NHLers: survey

The pace and excitement of 3-on-3 overtime isn’t just a thrill for… Continue reading

Avengers get epic send-off at ‘Endgame’ world premiere

LOS ANGELES — There were more than a few sniffles from the… Continue reading

Writers’ Trust launches program pairing rising writers with established mentors

TORONTO — The Writers’ Trust has launched a program that gives five… Continue reading

Family: A potpourri of Easter egg hunts, music and politics

The election is a thing of the past. Albertans have spoken. They… Continue reading

Sri Lankan-Canadians mourn victims of terrorist attack in their homeland

Sri Lankan-Canadians were gathering Monday to mourn those killed in a massive… Continue reading

Residents along Saint John River told to remain on alert as floodwaters rise

FREDERICTON — People who live along New Brunswick’s Saint John River are… Continue reading

Prince Edward Island voters to cast verdict on new electoral system

CHARLOTTETOWN — Canadians are expected to learn late Tuesday whether the cradle… Continue reading

Most Read