December 13, 2010 / 4:58 PM / 7 years ago

Bank of Canada says cheap money won't last forever

OTTAWA (Reuters) - Bank of Canada Governor Mark Carney warned on Monday that although global interest rates are likely to remain low for a prolonged period, companies and individuals should refrain from excessively risky investments that could hurt them when rates inevitably rise.

<p>Bank of Canada Governor Mark Carney pauses during a news conference upon the release of the Monetary Policy Report in Ottawa October 20, 2010. REUTERS/Chris Wattie</p>

In the prepared text of a speech, Carney said there may be a need for further rounds of easing by central banks elsewhere but also stressed Canadian monetary policy is focused on domestic conditions and would therefore diverge somewhat from that of the United States.

He warned Canadian banks, corporations and individuals not be lulled into a false sense of security by current low interest rates.

“Low rates today do not necessarily mean low rates tomorrow ... Cheap money is not a long-term growth strategy,” he said.

Carney repeated that any further interest rate hikes in Canada would require careful consideration. The bank held its benchmark rate steady at 1 percent last week for the second straight time, after hiking rates three times earlier this year.

“While the Canadian economy is importantly affected by developments in its largest trading partner, Canadian monetary policy is set for overall Canadian conditions and is guided by our 2 percent inflation target,” Carney said in the prepared text of a speech he was giving in Toronto.

“It is entirely appropriate that our monetary policies have diverged somewhat.” (Reporting by Louise Egan; Editing by David Ljunggren)

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