Households to face "trying" 2009: Bank of Canada

Wed Dec 17, 2008 3:41pm EST
 
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By Frank Pingue

TORONTO (Reuters) - Bank of Canada Governor Mark Carney said on Wednesday that 2009 would be difficult for many Canadians but he cautioned against overplaying the "extreme scenario" of a possible collapse in household incomes.

"Partly as a consequence of financial instability, next year will be a trying one for many Canadians," he said in a speech. "While the Canadian household sector remains relatively healthy, its resilience will be tested during the recession."

But Carney said measures taken in Canada and around the world were working their way through the system and would pull the economy out of the "full-blown financial crisis" it is in.

"Policy-makers have had to respond with bold measures. These will work, although it will take time for confidence to return and for capital to flow once again."

The focus on the Canadian central bank was sharper on Wednesday after the U.S. Federal Reserve lowered its benchmark rate to near zero on Tuesday.

The Bank of Canada has obviously studied nonconventional measures other than rate cuts, Carney said. The bank's overnight target rate is at 1.50 percent so it still has a little room left for cuts.

"We continue to do contingency plans at the bank," he told a business audience in Toronto. "We're very up to speed on scenarios ... but it's premature to talk about that."

Carney dished out implicit criticism of media coverage last week of a Bank of Canada report on the possibility of problems in the mortgage and household sectors.   Continued...

 
<p>Bank of Canada Governor Mark Carney speaks to the business community in Toronto December 17, 2008. Carney said on Wednesday that 2009 would be a challenge for many Canadians but he cautioned against overplaying the "extreme scenario" of a possible collapse in household income. REUTERS/Mark Blinch</p>