Optimistic central bank expects speedy economic rebound
And we’re not in a recession. And things are going just fine. Remember those messages from the Harper cabinet? Well now just let the Central Bank (run by Goldman-Sach alumnus Mark Carney) take care of everything and we’ll be all right. In other words, let them pump up a new, bigger bubble based on money at even one further remove from commodities.
Heather Scoffield, The Globe and Mail
January 22, 2009
OTTAWA – The world is in a deep, stubborn recession, but Canada should be able to dig itself out faster than in past slumps, and faster than many other countries, the Bank of Canada argues.
In its quarterly outlook, the central bank defended its renegade forecast for 3.8 per cent growth in Canada in 2010, crediting its own early cuts to interest rates for the speedy recovery.
Compared to Canadian recessions in the early 1980s and early 1990s, “monetary policy has been able to react in a timely and significant way to help offset the economic downturn and promote conditions to support recovery,” the bank’s Monetary Policy Report Update stated.
More fiscal flexibility than in the past, as well as strong corporate balance sheets, will also help, the bank said, adding that it was assuming “substantial” fiscal stimulus in Canada and around the world.
The bank’s expectations for a strong resumption of growth in 2010 contrast with many private-sector economists who believe Canada will continue to be held back by global weakness next year, and recover only slowly.
Indeed, that’s what the central bank expects for the rest of the world, as financial markets and consumer confidence remain broken.
The bank pointed out that global growth is expected to be about 1.1 per cent in 2009, “a rate consistent with a deep, global recession.”
The world economy should pick up some speed in 2010, but remain below its potential rate of growth for years, the bank said.
“Economic activity in all regions is expected to be much weaker over the next couple of years … because of a more protracted and widespread weakness in global financial markets and a stronger negative feedback to the real economy,” the update said. “Heightened uncertainty is also contributing to slower growth.”
Despite its expectations for a quick rebound in Canada, the bank expects a dismal 2009 for the national economy.
With the country’s real income set to drop a huge 3.6 per cent this year in the wake of plunging commodity prices, consumption will slow to a crawl, housing prices will decline, housing and business investment will contract, and trade will stagnate, the bank said.
The report did not specifically mention job prospects, but it warned that slack in the Canadian economy will build up sharply and persist until the middle of 2011 — implying sustained job losses.
All told, the bank expects a contraction of 1.2 per cent in 2009.
It sees three consecutive quarters of contraction for Canadian economic activity: -2.3 per cent in the fourth quarter of 2008, -4.8 per cent in the first quarter of 2009, and -1.0 per cent in the following quarter.
After that, as financial conditions normalize, stimulus from rate cuts and government spending kicks in, and the weak Canadian dollar attracts foreign demand, the Canadian economy should resume growth in the third quarter of this year, and quickly accelerate.
By the second half of 2010, the Canadian economy is forecast to be expanding at a blistering 4.9 per cent pace, the bank said.
Still, the bank warns that plenty of things could go wrong between now and then, and its forecast stands a high chance of not panning out as planned.
“The outlook is subject to a high degree of uncertainty,” the report said.
As for inflation, falling energy prices will mean total inflation will fall below zero, on a year-over-year basis, in the second and third quarters of this year, the bank said.
That’s not generally considered to be deflation, since the dips in inflation come from one sector of the economy. Core inflation, which excludes energy and the most volatile prices, will bottom out at 1.1 per cent in the fourth quarter of this year, the bank projected.
The report reiterated that it will continue to cut its key interest rate if necessary, in order to nudge inflation back to the bank’s two per cent target.
The bank cut its rate by half a percentage point earlier this week, leaving its key interest rate at 1.0, the lowest level ever. Since December 2007, the central bank has eased by a total of three and a half percentage points.
Source | See Also under Economics: Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably linked: Prentice | Business Development Bank will get $350M injection, Clement says | Prominent Economist: Crisis Caused By Government Interventions | New UK bank bailout | Vancouver dodges public referendum requirement for funding to finish Olympic Village | Zimbabwe unveils 100 trillion dollar banknote | Financial crisis: Bank of America given $138bn rescue package | Q&A: Prime Minister Stephen Harper speaks with The Post’s John Ivison | Premiers to press Harper for infrastructure boost | Vancouver mayor to recall legislature to handle Olympic Village crisis | Bring in a Canadian securities regulator: Flaherty’s handpicked business panel | Merged Citigroup, Morgan brokerage would be largest | Obama to visit Canada, Tories to propose ‘integrated carbon market’ | Brace for a big, ‘comprehensive’ budget: Harper | Canadians starting to save cash, shun debt | GM’s U.S. bailout deal bars strikes | European Leaders Call For New Global Order | Transport Minister Baird calls for dramatic action on stimulus package | Obama calls for ‘dramatic action’ on stimulus package | UK PM unveils ‘New Deal’ plan to create 100,000 jobs | Flaherty vows short-lived deficit, consults corporate chiefs on spending initiatives | Analyst: One Third Of Banks Could Collapse or Merge In 2009 | Auto bailout gives Federal, Provincial governments incremental nationalization powers | Banks won’t say where U.S. bailout money going | UK: Bailiffs get power to use force on debtors | Kissinger Calls For New International System Out Of World Crises | Canadian auto bailout could reach more than $4-billion | U.S. to spend $17.4-billion to ‘rescue’, nationalize auto industry | Harper government plans deficits as deep as $30 billion | Flaherty appoints business leaders to economic advisory council | IMF Chief Warns Of Riots In Response To Economic Crisis | Bank of Canada ready to monetize distressed equities | Canada may backstop ABCP rescue: Flaherty | The ugly spectre of ‘new Keynesianism’ and the self-appointed Guardians | Army ‘Strategic Shock’ Report Says Troops May Be Needed To Quell U.S. Civil Unrest | Federal government, Ontario agree on $3.3B auto bailout package | ‘Outrage’ greets banks’ failure to match rate cut | State to bail out, control US auto industry | Get close to Obama on economy and security, paper says | Financial Times: And now for a world government | Terence Corcoran: It’s Twilight for Detroit and the U.S. economy | Mexico to downsize metal in coins to save a few cents | Automakers seek $6B aid package from Ontario, federal government | Bank of England mulls “nuclear option” of cash injection | Zimbabwe tackles cash shortage amid riots and looting | Icelanders storm central bank in protest | Liberals and NDP sign unprecedented pact; to pursue stimulus, carbon taxes | UN Climate Change Conference open with call for ‘co-operation’ | UK closer to joining euro, EU commission president says | Iceland turns 90 amid economic ruin, currency freeze | TSX drops 600 points, N.Y. also falls | Britain buys control of Royal Bank of Scotland | Iceland inflation soars to 17.1% | Canada in recession: OECD | Maybe we should look at Zimbabwe before trying to print our way out of a money crisis | Britain to introduce massive stimulus packageObama appoints architects of economic collapse, financial globalism to economic team | | Jim Flaherty Urging Greater Federal, International Control over Canadian economy | Citigroup seeks ‘emergency cash’ | Deficits ‘essential,’ Harper says | Harper vows Canada will remain open to international trade | 5 injured during protest in Iceland over economic meltdown | ‘Hard decisions’ needed during economic crisis: throne speech | Paulson, Bernanke defend change of plan: $700-billion now to be given directly to banks | After G20 meeting, Ottawa ready to spend to spark economy | Congress Accuses Federal Reserve Bagman Of Bailout “Bait and Switch” During Angry Hearing | Flaherty eyes sale of Canadian government assets | Analysts Predict Hyper-Inflation To Push Gold To $2000, Oil to $300 | Terence Corcoran: Rescuers pulling market under | U.S. government won’t use bailout fund to buy troubled assets | Ottawa to pour another $50B into mortgage markets | Bank of Canada adds $8B to credit markets | Merrill CEO: Economic Environment Recalls 1929 | Fed Hides Destination Of $2 Trillion In Bailout Money | PM, premiers agree to speed up infrastructure investment | Flaherty lauds Keynesian global ‘economic stimulus’ strategies | Who are the Architects of Economic Collapse? | The Bush gang’s parting gift: a final, frantic looting of public wealth | IMF may need to “print money”, act as “world’s central bank” as crisis spreads | Morgan Chase Exec Brags Bailout Is for Takeovers, Restructuring, Not Lending | Draft letter calls on IMF to play critical role in financial crisis | Ottawa to guarantee interbank lending | More cash needed to save economy: Bernanke | Wall Street banks in $70bn staff payout | German parliament backs bail-out | Regulator says brokers failed on ABCP, sets new guidelines | US Bailout Cost Heads Towards $5 Trillion | Market Euphoria Dissipates | Loonie leaps, then reverses course | $25B credit backstop for banks ‘not a bailout’: Harper | Brown wants ‘global’ bank support | US considers following British example of taking stakes in banks | New World Order: Global co-operation, nationalisation and state intervention – all in one day | TSX closes up 226 points in wild day after rate cuts | Federal Reserve Moves to Monetize Commercial Paper Debts | Stocks recoup some losses after markets hit by panic selling | Star column blames ‘Capitalism’ for market woes, offers false choice: Authoritarianism or Socialism | Bank of Canada greases financial system with $12B in new cash | Stock markets drop despite bailout | Why Paulson’s Plan is a Fraud | Representatives Were Threatened With Martial Law In America Over Bailout Bill | Congress Rejects (First) Bail-Out Plan | Congressman Ron Paul: Bailout Will Destroy Dollar, World Economy | Paul Martin calls for ‘global solution’ | Markets sink as woes spread | UK banking shares plunge as crisis deepens | Congressman Ron Paul Schools Fed Chairman Bernanke on the Bailout Plan | Bailout is “petty cash”, Inflation is the Federal Reserve’s real crime | Private Federal Reserve Makes Power Grab as Bush, McCain Urge Congress to Approve Plan | Canadian Supreme Court refuses to hear appeal in ABCP case | Last major investment banks in U.S. change status | U.S., British market regulators ban short-selling | Next Federal Reserve bank bailout round could cost taxpayers 1$ Trillion Dollars | Bank of Canada piles on in global inflationary swindle | Central banks continue inflating global economy | Central Banks Move to Transfer Wealth from Taxpayers to Banks | Crisis on Wall St. as firms collapse | Goldman-Sachs Alumni Hold Reins of Financial System | Frontrunners emerge in scramble to save another major bank | Lehman Brothers on Verge of Collapse, Wall Street Fears | US Treasury nationalizes Freddie Mae, Fannie Mac | Cities Debate Giving Away Public Infrastructure to Bankers | Court Grants Big Banks Immunity from Lawsuits over Derivatives Losses | Bush Calls for New Highway Tolls, More Private Funding of Roads | US mortgage firm bailout includes rider clause to expand police state: all credit card transactions now to be reported to IRS | Global ‘liberalization’ illusion under threat. Economist calls for world economic regime, Keynesian saviour. Irony? | Federal Reserve cites global stakes in Fannie and Freddie rescue | Financial ’super cop’ role for Fed | What Really Killed Bear Stearns? | Soros points out regulated markets fail to operate on market fundamentals, calls for more regulation | Competition study calls for lowered barriers to foreign ownership, bank mergers | Massive overhaul urged on foreign investment in airlines, media, and banks | Bilderberg Seeks Bank Centralization Agenda | Secretive Bilderberg Group Reverses Policy, Releases Press Release and Attendance List | Banks face “new world order,” consolidation: report
January 28th, 2009 at 1:55 pm
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
January 29th, 2009 at 1:20 pm
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
February 4th, 2009 at 11:56 pm
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
February 12th, 2009 at 4:06 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
February 19th, 2009 at 11:18 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
February 22nd, 2009 at 10:20 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
March 2nd, 2009 at 12:18 pm
[...] Flashback: Optimistic central bank expects speedy economic rebound [...]
March 24th, 2009 at 1:25 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
April 2nd, 2009 at 11:56 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
April 21st, 2009 at 11:24 am
[...] confirms Geithner as treasury secretary despite reservations | Iceland’s government collapses | Optimistic central bank expects speedy economic rebound | Ottawa risks erasing decade of debt reduction | Canadian, U.S. energy policies to be inextricably [...]
May 20th, 2009 at 5:00 pm
[...] [...]
June 9th, 2009 at 10:06 am
[...] [...]
August 5th, 2009 at 12:12 am
[...] [...]
September 14th, 2009 at 12:05 am
[...] [...]
December 31st, 2009 at 1:49 pm
[...] [...]