Rates staying low
Bank of Canada governor Mark Carney has raised the alarm on the surgingCanadian dollar, while reiterating his conditional commitment to keepinterest rates at historical lows.
Bank of Canada governor Mark Carney has raised the alarm on the surging Canadian dollar, while reiterating his conditional commitment to keep interest rates at historical lows.
The central bank says the dollar’s recent surge above 90 cents US has been so rapid and robust that it threatens to strangle the nascent economic recovery.
The central bank pointed out it has plenty of ammunition left at its disposal to influence the economy, specifically making reference to so-called quantitative easing — the purchase of government bonds, or debt, to free up stimulative money.
The loonie has soared past the 90-cent level and remains there despite a two-cent drop Wednesday.
The dollar dipped briefly below 90 cents in early Thursday trading but bounced back to close at 91.17.
Economist Sal Guatieri of BMO Capital Markets doubted Carney’s trigger finger on quantitative easing is getting itchy.
“A good part of the appreciation (of the loonie) is supported by rising commodity prices, which neutralizes the adverse impact of the stronger dollar on the economy,” he said.
The bank said its overnight trend-setting rate would stay at the practical low of 0.25 per cent and, unless something unforeseen occurs, will stay there until next summer.