BoC governor says manipulating the loonie would work only in the short term.
February 12, 2013
by The Canadian Press
OTTAWA—Bank of Canada governor Mark Carney warns the Canadian economy would suffer from a currency exchange war—a battle the G7 has pledged not to engage in.
Carney tells a parliamentary committee in Ottawa that as a smaller economy, Canada does not have the flexibility of the US and it would be futile for him to seek to manipulate the level at which the loonie is traded.
The Group of Seven leading industrial nations, which includes Canada, have warned that volatile movements in exchange rates can adversely hit the global economy.
The G7 statement urges countries to set monetary policy to meet local economic targets and not to engage in a currency war through the manipulation of their currencies in order to boost exports at the expense of others.
Carney says at best, manipulating the currency works only in the short term. Eventually the economy must adjust through lower wages for the country’s workers, something he says parts of Europe are currently experiencing.
More generally, Carney says he believes the weakness in the Canadian economy during the latter half of last year was partly due to temporary factors.
Importantly, he believes the external risks to the global economy going forward have diminished and that Canadian growth will pick up pick up steam this year.
©The Canadian Press