Having helped steer Canada's economy out of recession, Mr. Carney and policy makers across the globe are carefully watching for signs that their economies are healing and trying to determine the right moment, and the right pace, at which to start withdrawing the unprecedented stimulus that helped counter the effects of the financial data.
While few believe there's much chance Mr. Carney will abandon his “conditional” commitment to keep borrowing costs at a record-low 0.25 per cent through the middle of the year or longer, every piece of data over the next few months will be parsed for indications of how quickly rates might rise in the second half of the year and beyond.
Timing is particularly important because no central banker wants a repeat of 1937, when the U.S. Federal Reserve tightened prematurely, snuffing out a tentative recovery and thus prolonging and worsening the Great Depression.
No economist believes the central bank chief is going to adjust borrowing costs Tuesday, and few contend he should be rushing to so much as tweak the wording of the pledge to leave rates where they are unless the inflation outlook changes.
But six months before a July decision which could mark the first rate hike since the crisis, a quarterly economic and inflation forecast this Thursday may offer clues about whether Mr. Carney thinks the recent rebound is here to stay, and how quickly the economy might return to something resembling pre-recession form.
And data on consumer prices this week from Statistics Canada could suggest whether there's any possibility he will need to shorten or extend his holding pattern, the length of which depends on how soon he sees inflation returning to his 2-per-cent target.
No comments:
Post a Comment