WASHINGTON: As international policymakers warn of weaker growth, the Bank of Canada said on Saturday it still retained a panoply of tools to handle possible economic trouble down the road.
The central bank's governor, Mark Carney, said that despite concerns of possible spillovers from Europe's debt problems, Canada was not in recession and did not need extra help at present.
"The ability to keep core elements of the financial markets functioning is there if we were to need it. We're not in that situation in this moment in time," he told reporters after a meeting of the International Monetary Fund.
"We still have an interest rate tool," the governor said, but did not hint at the direction of rates.
Canada was the first among the Group of Seven leading industrialized nations to raise rates from rock bottom after the last recession. The targeted overnight rate is 1 percent. He said he would change rates only in pursuit of the bank's 2 percent inflation target.
The bank also gained vast experience from the 2007-09 crisis with a variety of tools to provide exceptional liquidity, and it has renewed dollar swap lines with the US Federal Reserve, Carney pointed out.
"These tools are all there as options of they were needed," he said.
The Canadian economy contracted slightly in the second quarter, largely due to temporary factors including the effect of the Japanese earthquake and tsunami, but he saw growth returning in the current quarter.
"I would not expect that we would not show growth in the third quarter, particularly given data that is already coming in for the third quarter," he said.
It is unquestionable that global growth has slowed and risks are skewed to the downside internationally, which the International Monetary Fund talks here dealt with, Carney said.
"We're encouraged by the discussions this weekend, but in the end this will require action, not just discussion," he said.
He said the euro zone policymakers seemed to understand the seriousness of their debt crisis and the potential remedy. He was encouraged by their support of bank recapitalization and their willingness to explore enhanced flexibility and capacity of the EFSF bailout fund.
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