The Globe and Mail reports in its Tuesday, Feb. 9, edition that the Bank of Canada is giving
Ottawa more cover to roll out billions
of dollars of fiscal stimulus
in the coming federal budget.
The Globe's Barrie McKenna writes that Bank of Canada deputy Governor
Timothy Lane warned Monday that relying too heavily on low interest
rates to spur the
economy could lead to unwanted
financial instability, including
excessive consumer borrowing. He said under certain circumstances,
fiscal stimulus may be a more
prudent way to get the same economic
lift. Mr. Lane said:
"Relying primarily on
monetary policy to provide stimulus
may lead to financial vulnerabilities. In
such circumstances, fiscal policy
may be called upon to provide stimulus,
particularly since it is likely
to be more effective at low
interest rates."
Mr. Lane acknowledged that
more government spending can
"create its own problems." He said, however, that it has to be
weighed against the danger of too
much private-sector borrowing.
The comments mark the second
time in recent weeks that a
top central banker has suggested
the bank could use some help
from government in the face of
economic weakness and near-zero
interest rates.
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