TD Bank CEO warns on C$ strength, interest rates

Thu Mar 25, 2010 8:55pm EDT
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*By Andrea Hopkins

TORONTO (Reuters) - Toronto-Dominion Bank's chief executive on Thursday urged Canadian policymakers to use fiscal measures rather than interest rate increases to slow the economy, warning that higher rates could damage the recovery.

The comments by Ed Clark, who heads Canada's second-largest bank, come a day after Bank of Canada Governor Mark Carney hinted in a speech that the central bank may raise rates sooner than expected to counter inflation fears.

Speaking to reporters after TD's annual meeting in Quebec City, Clark said he was concerned that the Canadian dollar, which has approached parity with its U.S. counterpart, is rising so high that it may hurt domestic industry.

"I definitely worry. I think we shouldn't tilt policy to make that problem worse, that's for sure. And that's what I would favor, if you need to put the brakes on the Canadian economy, I'd put them on the fiscal side, not on the monetary side, so you're not impacting the exchange rate," Clark said.

"My preference would be that we move faster to get the deficit down if we decided that we had to do something to slow the economy down," Clark said.

Any move by the Bank of Canada to raise interest rates would likely boost the attractiveness of the Canadian dollar because U.S. policymakers are not yet ready to start tightening monetary policy there. The U.S. economy has lagged Canada's recovery.

"I agree with the concern that the exchange rate in the long run, if it gets above what we think the long-run equilibrium is -- and I don't think most people think it is at par today -- that that's bad for Canadian industry in the long run and it's bad for Canadian exporters," Clark said.

TD Bank has a big personal and commercial banking operation in the United States and has said it would like to expand its market share from the Northeast down the U.S. East Coast.   Continued...

<p>Ed Clark, the chief executive of TD Bank, speaks at the Reuters Finance Summit in New York in this November 12, 2008 file photo. REUTERS/Brendan McDermid</p>