This is from the Star.
It remains to be seen how accurate Carney's forecast will be. Not long ago the government was telling us how the fundamentals are so good and that a deficit was not at all likely. But the economic future is still not very clear at all. Given that demand for resources will be down and costs of oil development in the oil sands probably already is greater than the price in some cases there could be a big slowdown in provinces such as Alberta.
Carney forecasts `sluggish growth'
Bank of Canada Governor Mark Carney, in his first public comments since Tuesday’s quarter-point interest rate cut, signalled Oct. 23, 2008, that the central bank would reduce its trend-setting rate again if the global financial crisis worsens.
Other nations headed for a mild recession, central bank chief says
October 24, 2008 Dana FlavelleBusiness Reporter
While the rest of the globe is headed for a ``mild recession,'' Canada is entering a period of ``sluggish growth,'' the governor of the Bank of Canada said yesterday.
In describing Canada's growth prospects, Mark Carney said the central bank looked at the broader definition of recession used by a panel of U.S. economists.
While two quarters of negative growth is the technical or ``shorthand'' way of describing a recession, Carney said the broader definition takes into account factors such as employment growth, not just output.
``For a lot of people that's what a recession is, employment. That's what people feel. It's a bigger set of issues than just this technical question of whether there's two negative quarters,'' Carney asserted.
In his first public commentary since cutting the bank's trend-setting rate by another quarter percentage point on Tuesday, Carney said Canada's financial system was in relatively good shape.
However, he also said the central bank remains on alert for signs that conditions may be worsening and would cut rates again at its Dec. 9 meeting, if warranted.
``Now is not the time to relax. There have been some extraordinary events. We're very focused on ensuring the markets return to a full state of functioning, not just domestically but internationally,'' Carney said, referring to the global credit crisis caused by events largely outside Canada's borders.
The central bank revised its forecast for economic growth downward earlier this week to 0.6 per cent for this year and next year, but predicts growth will rebound by 2010.
Carney defended the bank's decision to limit its latest cut to a quarter point, instead of the half-point cut many investors wanted.
He said the bank had already acted "aggressively" earlier this year and in recent weeks with the result that its trend-setting overnight rate has fallen by half to 2.25 per cent since December 2007.
As well, he said, inflation is projected to slow to an annualized rate of 1 per cent, the low end of the central bank's target range.
Carney declined to be specific about the impact of global events on different regions of the country. However, he noted the recent steep slide in the value of the Canadian dollar against the U.S. greenback will only partly offset the effect of falling global demand for basic commodities, such as oil and metals.
The dollar has dropped 18 per cent in the past four weeks, giving up four years of gains, amid falling interest rates, plunging global demand for oil and a resurgence of the U.S. dollar as a safe haven for investors.
Carney acknowledged regions dependent on manufacturing are likely to feel the effects of slowing U.S. demand for cars and homes.
Employment growth is also likely to slow as the economy slows, he said in response to a question.
But while other parts of the world, such as the United States, are now in recession and growth in Europe and emerging countries is slowing, Canada is in a position of relative strength, the central bank governor stressed.
Carney also endorsed Canada's banking system, saying it hasn't required the kind of multibillion-dollar government bailouts seen in other developed countries.
He said he welcomed measures announced yesterday by Federal Finance Minister Jim Flaherty to backstop interbank loans to ensure Canada's chartered banks remain competitive in global markets with rival banks that have had their government's full support.
Carney said access to credit remains relatively good in Canada and has been improving in recent weeks as other countries took steps to unlock international money flows.
He said the bank is seeing signs that ordinary consumers are able to get loans on reasonable terms.