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Canada sounds warning over global growth

Wednesday 27 October 2010 - by Will Henley

The Bank of Canada has waded into the row over global exchange rates with a warning that a currency war could damage worldwide prospects for recovery.

In an address to the House of Commons Standing Committee on Finance on Tuesday, Governor of the Bank of Canada Mark Carney admitted that the country’s own prospects were less positive than prior forecasts had suggested, as he cautioned that the world could be in for a difficult few months ahead.

“Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery,” Carney said.

The governor admitted to parliamentarians that inflation in Canada is set to be “slightly below” the Bank’s July projection of 2 per cent by the end of 2012, as he revised growth rates downward to 3.0 per cent in 2010 and 2.3 per cent in 2011.

“This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending,” the governor said.


“Ongoing deleveraging in many advanced economies is expected to moderate the pace of growth.”

Carney pointed to a weaker-than-projected recovery in the United States, though insisted that private demand should become “sufficiently entrenched” to sustained further recovery.

He continued: “The global economic recovery is entering a new phase. In advanced economies, temporary factors supporting growth in 2010, such as the inventory cycle and pent-up demand, have largely run their course and fiscal stimulus will shift to fiscal consolidation over the projection horizon.”


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