Finance committee  Thank you very much, Chair, and thank you to the members for this invitation. Good morning everyone. Paul and I are pleased to appear before this committee to discuss the Bank of Canada's perspective on the current state of the domestic and global economies. Let me state at the

Finance committee  As a point of clarification, certainly I welcome the offer, but the proposed changes in Bill C-50 are the alpha and omega of our—

Finance committee  It's a good question. The market should have no reason to make that inference that the size of change of interest rates by the bank would necessarily move from 25 to 50 basis points. We made adjustments there. As I said earlier, there were two major shocks to the global economy,

Finance committee  I'd like to respond to that.

Finance committee  It was a half point and a half point.

Finance committee  I'm not going to presume to give advice to the Federal Reserve or any other central bank. They certainly are focused on inflation and in fact have enhanced their accountability on that over the past year in terms of specific targets for individual members. I want to underline a

Finance committee  A very quick answer is that a vast majority of these non-bank asset-backed commercial paper programs had a very high degree of synthetic assets, which had a very large degree of embedded leverage that was not clear to investors and that created an effective subordination of those

Finance committee  It's a good question. I've said I'm not commenting on the specific legislation you referred to, but I'll just take it first from a medium-term perspective and reference something I tried to say earlier, which is that the contribution of labour supply--people working, but also hou

Finance committee  I would say--and I will go back to this issue--that this is the issue: our ability to conduct purchase and resale agreements. I know it sounds very dry and arcane, but we have less flexibility to provide liquidity in the system, at times of some stress but not extreme stress, tha

Finance committee  Those are important questions. I go back to a couple of things. First, clarity about pre-existing and existing legislation--proposed subparagraph 18(g)(ii), a situation of “severe and unusual stress”, which is an existing power of the Bank of Canada, passed in 1998 or 1999. That

Finance committee  Because the issue we're trying to address is not for situations of severe and unusual stress; i.e., zero interest rate policy, deflation risk, and a financial system that's totally frozen. We're trying to address issues in the middle area, where there are liquidity issues in the

Finance committee  We're not looking for powers. These are not facilities. We're doing term.... I'll bring it down to the concrete right now. We are undertaking term purchase and resale operations at this moment. We announced it yesterday. We are limited in the type of securities against which we c

Finance committee  It's a very important question. I'd have to say, though, up front, in terms of estimating the potential costs of that and having the Bank of Canada imprimatur on it, we do not have that level of estimate. On harmonizing the taxes, there are potentially some advantages in terms o

Finance committee  We are managing Canada's monetary policy. I understand your argument, but it further underscores the importance of having a Canadian economy that is sufficiently flexible for there to be movements of goods, services and people within our country.

Finance committee  We take into account the overall situation in the United States, but the key interest rate in Canada is sometimes 200 base points higher, and at other times, 200 base points lower than that of the United States.