March 13, 2008 / 5:04 PM / 10 years ago

Bank of Canada says credit woes hitting economy

OTTAWA (Reuters) - Canada’s economy is beginning to feel the spillover effects of the global financial market turmoil but its financial institutions remain relatively healthy compared to other countries, Bank of Canada Governor Mark Carney said on Thursday.

<p>The Governor of the Bank of Canada, Mark Carney, speaks to the British Columbia Chamber of Commerce and the Business Council for British Columbia in Vancouver British Columbia, February 18, 2008. REUTERS/Lyle Stafford</p>

Carney said the central bank’s injections of cash into money markets have succeeded in bringing the overnight rate close to its target, which now stands at 3.5 percent. Conditions in term money markets have improved since December but are still not back to historical norms, he said in a speech to be delivered in Toronto.

He made no comment on the outlook for monetary policy in Canada but said that in times of volatility, it becomes more important than ever that the bank maintain a low, stable and predictable inflation rate.

In trying to repair stressed money markets, Carney said global policymakers should focus on addressing the three underlying problems that caused the disruption -- lack of liquidity, lack of transparency and misaligned incentives that encouraged excessive risk taking.

However, he said officials can afford to take some time before taking additional action because “many of the market practices that contributed to the dislocations have stopped.”

Reporting by Louise Egan; Editing by Randall Palmer

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