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Sept. 24 (Bloomberg) -- Bank of Canada Governor Mark Carney said there has been some progress this weekend by European policy makers to stem their debt crisis, and that his own economy should avoid falling back into recession as growth rebounds from a second-quarter contraction.
Speaking to reporters in Washington after the meeting of the International Monetary Fund, Carney said he was “encouraged” by euro-area policy makers’ “diagnosis of the seriousness of the situation.”
As Greece’s prospects darken and the 18-month debt crisis threatens to tip Europe and the global economy back into recession, the euro area’s managers are stepping up efforts to identify measures that can stop it from spreading. Their strategy to date has been criticized at the IMF annual meetings.
“We’re encouraged by the discussions this weekend, but in the end this will require action, not just discussion,” Carney said.
Policy makers have “considerable resources” at their disposal to stem the crisis, Carney said. “The political question is how European authorities want to deploy the resources,” he said. “The capacity is there, many times over.”
The “thrust of the conversations” over the weekend related to “broader issues within the euro zone, not with respect to Greece, specifically,” Carney said.
While there’s “no question” the world economy has slowed and the risks are “skewed to the downside” globally, Carney said the world’s 10th-largest economy will return to expansion in the July-September period.
Growth to Resume
“I would not expect that we would not show growth in the third quarter, particularly given data that has already come in,” Carney said.
The central bank still has room to react if slowing growth threatens to push Canadian inflation below its 2 percent target, Carney said.
“We still have an interest rate tool,” he said, referring to the bank’s policy rate, which has been at 1 percent for a year. “We have monetary policy, which will be used appropriately to achieve the inflation target.”
--Editors: Paul Badertscher, Gail DeGeorge
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