Carney Sees Less Need to Signal Bank of Canada Rate Changes Than in 2010

Bank of Canada Governor Mark Carney said there is less need to signal changes in interest rates than last year, when he gave advance notice of his intention to raise borrowing costs, according to CIBC World Markets chief economist Avery Shenfeld.

“He doesn’t see the need to be that specific in general at policy turns,” Shenfeld said today in an e-mail, citing comments he said Carney made at a fundraising dinner last night. Shenfeld added that Carney “hopes that in looking at the same data and Bank’s analysis, markets will generally converge in expectations that are in line with where rates are headed.”

Shenfeld sent a later e-mail asking people not to cite his earlier message because it was an “off the record” event.

Bank of Canada spokesman Jeremy Harrison said in a telephone interview today that he wouldn’t “substantiate” Shenfeld’s account of Carney’s remarks at the event in Toronto because it was off the record.

Later he said that “to encourage a frank and open exchange of views, these events are often closed to the media. However, it is important to note that any comments by Bank officials on these occasions will reflect views that have already been communicated publicly.”

“When the Bank has new or updated views on the economy or its monetary policy, it always provides this information publicly, in an open and transparent manner,” Harrison said.

‘Carefully Considered’

Carney reiterated in a May 16 Ottawa speech that future rate increases would be “carefully considered” after raising them three times last year from a record low. Carney began increasing rates last June before the bank’s conditional commitment to keep them unchanged had ended. The bank had given investors a clear signal that rates would increase, saying six weeks earlier it was “appropriate to begin to lessen the degree of monetary stimulus.”

Investors are “waiting for a hint from the bank saying that we’re ready to hike,” said Charles St-Arnaud, Canadian economist and foreign exchange strategist at Nomura Securities International in New York, who has also worked at the Canada’s finance department and central bank. “It seems that Mark Carney is signaling that he won’t give any signal, that people should be looking at the data and the bank’s analysis to make their expectations.”

Shenfeld’s e-mail also said that Carney said he is “concerned that the bond market isn’t sending America the signal that it needs to act” on its budget shortfall. That is “due in part to huge central bank holdings of Treasuries,” the e-mail said. Carney said it will be a long time before there is a meaningful tightening in monetary policy in the U.S., and also said he doesn’t see the U.S. addressing its fiscal issues until after 2012, the e-mail said.

Carney was at the United Jewish Appeal Federation of Greater Toronto last night, spokeswoman Leigh Brown wrote in an e-mailed message.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.