Bank of Canada head sees long-term commodity boom
By Claire Sibonney
TORONTO (Reuters) - Commodity prices are likely to remain high for longer than in previous booms, Bank of Canada Governor Mark Carney said on Tuesday, while repeating the central bank's recent warning that interest rates may need to rise.
Carney, asked to name potential mistakes that investors could make, told a business audience that one error "would be to think that ... current elevated levels of commodity prices are a temporary phenomenon."
"Eventually, all commodity booms end, but this one in our view will go on for some time," he said, noting that Canada is well positioned in a global "commodity super cycle."
The comments came after the central bank last month surprised markets with unexpectedly hawkish language in its interest rate announcement, fueling bets on a hike later this year.
Carney reiterated that message on Tuesday.
"We've observed that with an economy that has been growing above potential, with underlying inflation dynamics firming, that some modest withdrawal of some of the exceptional considerable monetary stimulus that's currently in place may become appropriate," he said.
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Carney, who is also chairman of the global Financial Stability Board, cautioned that any rate hikes would be weighed carefully within the context of international risks, such as Europe's debt crisis, which he said Canada is not completely insulated against. Continued...