Bank of Canada's continued focus on inflation right for current economic times: Governor Carney

    HALIFAX, Jan. 27 /CNW Telbec/ - Canadians can be confident that monetary
policy will maintain a "relentless" focus on controlling inflation, whether it
rises above or drops below the official target range, Bank of Canada Governor
Mark Carney said today.
    Experience has shown that controlling inflation is the best contribution
that monetary policy can make to Canadians' economic and financial well-being,
an issue that is particularly crucial during this period of extraordinary
global financial turmoil, the Governor said in a speech to the Halifax Chamber
of Commerce.
    "In time, the global financial crisis will end, and the global economy
will recover, although the speed with which this will happen is subject to a
high degree of uncertainty," the Governor said. "The relentless focus of
monetary policy on inflation control is essential in this time of financial
crisis and global recession, and remains the best contribution that monetary
policy can make to the economic and financial welfare of Canada."
    Governor Carney noted that the Bank's inflation-targeting framework,
established jointly with the Government of Canada, takes a symmetrical
approach to controlling inflation. This means that the Bank worries as much
when inflation falls below the target of 2 per cent as when it rises above
target, he said.
    Although the severe global financial crisis has raised concerns about
deflation in some countries, the possibility of such a sustained fall in
prices is remote in the Canadian economy for several reasons, said Governor
Carney. Canada's labour, product, and capital markets are flexible; its
banking system is one of the soundest in the world; and households,
businesses, and the public sector have considerable financial flexibility. As
well, Canada's floating exchange rate allows for an independent monetary
policy which ensures that "we are in control of our own monetary destiny," he
    Moreover, Canada has the clearest, most powerful monetary policy
framework in the world. "The advantages of that framework have been
demonstrated, with inflation brought down and kept low and stable since the
early 1990s, and they are equally relevant in times of disinflationary
pressures," he said.
    The Governor reiterated the Bank's economic projection as outlined in its
Monetary Policy Report Update published on 22 January. Although economic
activity in Canada is projected to decline this year, it should accelerate to
above-potential growth in 2010, supported by policy actions and the past
depreciation of the Canadian dollar. On an annual average basis, real GDP is
projected to decline by 1.2 per cent in 2009 and to rebound by 3.8 per cent in

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