BoC's Carney losing sleep over current account gap

Thu Jan 27, 2011 5:19pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Chrystia Freeland and Catherine Bosley

DAVOS, Switzerland (Reuters) - Canada's central bank chief is unfazed by rising global food inflation, losing sleep instead over his country's gaping current account deficit, which he has blamed partly on the strong currency.

In an exclusive interview with Reuters Insider television on Thursday, Bank of Canada Governor Mark Carney said he sees little risk of rising global food prices creating inflationary pressures in Canada and is "quite comfortable" with keeping interest rates at their current historical lows.

Repeating a message he first stressed last week after the bank left its key interest rates unchanged, Carney said the biggest worry at the moment is Canada's largest current account deficit on record.

"The thing that keeps me up at night a bit is that in this rebalancing of global demand, the Canadian current account has swung 6 percentage points of GDP in the last three years. We've gone from a 2 percent surplus to a 4 percent deficit," he said.

Carney has previously blamed the high-flying Canadian dollar for two-thirds of that deficit.

Slowing exports to the United States combined with surging imports contributed to a third-quarter current account deficit that, as a percentage of GDP, was the biggest since the early 1990s.

Rather than talking down the currency, Carney has urged businesses hurting from the strong Canadian dollar to take action to win back their shrinking share of the U.S. market.

"We have a competitiveness problem in Canada. We need to boost productivity," he said.   Continued...

<p>Bank of Canada Governor Mark Carney takes part in a news conference upon the release of the Monetary Policy Report in Ottawa January 19, 2011 REUTERS/Chris Wattie</p>