Finance Committee on Oct. 27th, 2009

[Mark Carney]

Thank you for the question.

Yes. We have consistently emphasized that the Bank of Canada retains considerable flexibility in the conduct of monetary policy. We were at pains, as you recall, to outline the principles behind policy at very low interest rates—so-called unconventional policy. We have not had to deploy those instruments beyond the conditional commitment, with which you're familiar, but we certainly retain all those other options. I would underscore our determination to use those options if the situation required it in order to achieve the inflation target, but we would only use them to the extent that they were required to achieve the inflation target.

So to go back to your analogy, no, the tank is full. It's like the pickup trucks that used to have two tanks: the interest rate tank had been used up, but we switched over to a full tank of unconventional. We haven't had to use it.

In our expectation, just to underscore for members of the committee, we think policy is set appropriately in order to achieve that target, staying at 0.25%. We expect to stay there through the end of June 2010 on current outlook for the global and Canadian economies in order to achieve that inflation target.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine. Thank you.

What I'd just ask you as well, then, as Parliament proceeds into the future, is that if you have any thoughts or deliberations as to other regulatory measures we might consider to help prepare us to keep an additional level of fuel capacity, we would be most appreciative.

[The Chair, Conservative, James Rajotte]

Did you want to respond to that, Governor?

[Mark Carney]

I think it deserves a more fulsome response at the appropriate time. We defer to the proposals of the government in due course.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Mulcair for the final round.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I am sure that the minister appreciates your concern, but one of the reasons for these meetings is precisely so we can benefit from your unique expertise. As other members have already said—and I am very sincere in agreeing with them—we have confidence in you, in your ability to analyze the facts and to give us recommendations, when necessary, not only in response to what we have already done, but also as potential guidance for the future.

I want to come back to the first question I asked you the first time we met, a question that is a lingering concern for me. Even if you look through the lens of 2% inflation, are you concerned about whether we will be able to generate inflation ourselves by changing oil reserves and printing more money? With the money coming in, Canada has become an oil powerhouse. Will we experience the same kind of instability as the Netherlands did in the 1950s, when it generated incredible oil wealth but wiped out whole sectors of its economy, namely the manufacturing sector?

Are there issues that cause you to lose sleep at night and that we should be studying?

[Mark Carney]

Thank you.

The Bank of Canada's biggest concern in the medium term is the extensive restructuring of the global economy. We have just come out of a major global recession. For Canada, that means that demand sources will be changing. We need to make significant changes to our trade strategies and our markets, both now and in the future, which will have legislative consequences.

The Bank of Canada seeks to control inflation, but we also work very closely with the Office of the Superintendent of Financial Institutions, the Department of Finance and our international counterparts. We absolutely have to address all of these issues surrounding the financial system. That is key.

[Thomas Mulcair, NDP, Outremont, QC]

It's a pleasure to meet with you, as usual, Governor Carney.

In the two minutes left I'd like you to elaborate a little on that for us. You've given us some indication of what has to be done. Do you have any great fear that we might have missed something; that this deep recession you've just described might be the first of two or three if we haven't got everything right? Is there a real danger that there might be another trough waiting for us once we walk out of this one?

[Mark Carney]

There is a danger that the recovery outside our borders has limited momentum that will further deepen the restructuring we need to do in our economy. There is also a risk--in the spirit of the discussion today--that the agenda of the G-20 will not be properly implemented in a timely fashion. This is going to get very technical very quickly. It would serve us all well if people were well informed about the key technical aspects.

Yes, the devil's in the detail, but this is an important agenda. It's been agreed on by heads of state. Canada can help lead on it, but it needs to get done. Going back to the division of labour, it's our job to work with those who have primary responsibility to ensure that this gets done.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mulcair.

Thank you, Mr. Carney and Mr. Jenkins, for being with us here today and responding on a whole series of very challenging and thoughtful issues. We want to especially thank you for being with us and engaging parliamentarians for a full two hours. We appreciate that. We look forward to your visit in the next six months, or any time you want to come back.

Colleagues, I think we had a very good discussion today. We will have the Minister of Finance with us here this afternoon, so we'll see you back here at 3:30.

Thank you again.