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Free AccessMNI POLICY: BOC's Wilkins: Global Debt Threatens Growth>
By Courtney Tower
OTTAWA (MNI) - Following are the key points from a speech by Bank
of Canada Senior Deputy Governor Carolyn Wilkins on Thursday, to the
University of British Columbia School of Economics and CFA Society
Vancouver, in Vancouver, British Columbia:
- Wilkins said elevated and rising global debt was a headwind to
growth that "makes us vulnerable to another period of financial
instability." Rising debt, she added, is "the global development that
concerns me the most."
- More needs to be done to reduce the downside risks facing
economies, and at the top of that is for the United States-China to
resolve their trade war. Wilkins took direct aim at the "misguided"
policy of imposing tariff and other barriers to trade. However, she
expects global expansion to continue Imposing tariffs to bring down
trade deficits and bring back exported jobs "may be seductive but it's
misguided," Wilkins said. "Tariffs lower GDP for everyone because they
harm investment and productivity," she added. "That's why it would be
good for everyone if the United States and China resolved their
dispute." She also called for an end to United States tariffs on steel
and aluminum affecting Canadian industries, and ratification of the
Canada-United States-Mexico agreement.
- Although the global financial system "is in a better place" than
a decade ago, uncertainties such as trade tensions "could throw us off
track." She added: "When downturns occur, high leverage is usually an
amplifying factor." Top of her list of things needing to be done to
reduce downside risks is "a long-lasting resolution to the current trade
war." This conflict, she said, "is threatening growth around the world
right now." Among other things would be to extend the stress tests that
banks must take to non-bank financial institutions, including asset
managers.
- On the domestic front, Wilkins made no reference to Bank of
Canada monetary policy following the more dovish turn taken in the March
6 policy statement. The BOC then said the first half of this year will
show weaker growth than had been expected, which Wilkins repeated
Thursday. She still expects Canadian GDP growth to pick up "later this
year."
- Wilkins did repeat that household debt in Canada, at about 178%
of disposable income, was the Bank's chief concern for vulnerability to
the financial system. She said, though, that it seems to be stabilizing,
and that chartered banks in Canada can handle economic shocks that might
occur from falling house prices.
--MNI Ottawa Bureau; yali.ndiaye@marketnews.com
[TOPICS: M$C$$$,MACDS$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.