Mortgageman Blogs Again!

Drop in rates should add more stimulus: BoC
Reuters Published: Tuesday, April 28, 2009

OTTAWA -- The Bank of Canada's announcement that it would leave official interest rates unchanged for a year helped push down market rates across the yield curve, and that should provide more economic stimulus, Governor Mark Carney said on Tuesday.

"We did see an important move in interest rates farther out the yield curve as a result of that commitment which should provide considerable additional stimulus to the economy," he told the House of Commons finance committee.

Senior deputy governor Paul Jenkins said if the Bank of Canada did engage in unconventional easing through buying securities, it could keep the operations neutral by concentrating purchases on indexes.

"There are techniques that can be used to achieve a neutral effect. For example, one could buy the indexes," senior deputy governor Paul Jenkins said.

Mr. Carney said the United Kingdom and some other European nations must implement plans to deal with toxic assets in their banks, similar to that of the United States.

"It is an underlying assumption of our current projection that there will be steady progress on stabilizing the U.S. banking system and therefore the global financial system," Mr. Carney said in testimony to a parliamentary finance committee. "We need similar steps, different designs, but similar effective steps to recap and separate assets to continue to proceed in the United Kingdom and in Europe."
© Thomson Reuters 2009