High dollar to slow recovery, central bank says
Flashback: Canada’s rate hikes will be tied to the Fed | Russia to add loonie to reserves: report | The time has come for North American monetary union | Loonie continues race toward parity with U.S. dollar | Ottawa plans U.S. dollar bond | Central bank of Canada stands ready to inflate currency in response to strong loonie | Soaring loonie adds to anxiety over economy | How realistic is a North American currency? | Loonie leaps, then reverses course | Consider a continental currency: Jarislowsky | Globalization makes national currencies obsolete | Vicente Fox Admits Plan For Single NAFTA Currency | Fraser Institute: The Case for the Amero
Les Whittington, Toronto Star
January 21, 2010
OTTAWA–The higher-valued Canadian dollar and the possibility the global recession will linger longer than expected are raising questions about the strength of Canada’s recovery, the Bank of Canada said today.
In its quarterly economic outlook, the central bank said the global economic recovery has begun and Canada is no longer technically in a recession, which is defined as six months of consecutive negative economic output.
But Bank governor Mark Carney is cautious about the strength of the economic rebound in this country.
“There is a risk that persistent strength of the Canadian dollar could act as a significant further drag on growth,” the Bank said in its quarterly Monetary Policy Report, released this morning.
“Another important downside risk is that the global recovery could be even more protracted than projected,” the Bank adds.
The Canadian dollar, which has been trading in the 95-cent (U.S.) range on exchange markets, has climbed steadily over the past two years. A higher dollar makes Canadian exports to the U.S. market less competitive and slows economic growth, particularly in the country’s manufacturing heartland of Ontario.
On Tuesday, the Bank, as expected, announced its trend-setting overnight rate will remain at a record-low 0.25 per cent.
With the recovery far from robust, Carney is making it clear the Bank is likely to stick to its commitment to maintain the current low interest rate setting until mid-2010.
Carney said last year that, barring a burst of inflation, he would keep the rate at that level to spur economic activity and offset the recession.
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