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Mark Carney’s BoC Record Under Fire

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Mr. Carney’s U.K. honeymoon ended months ago, but the economic wolves are now circling his record in Canada. Once a hero, now he is accused of having driven factories and jobs out of Canada in favour of promoting condo development. The charge, from CIBC World Markets economist Avery Shenfeld, is a bit of a shock. “In effect,” he said, “monetary and exchange-rate policy traded off more condos for fewer factories.”

That’s some charge. As Mr. Shenfeld sees it, the Bank of Canada under Mr. Carney kept interest rates low between 2010 and 2013. During that period the Canadian dollar stayed at parity with the U.S. dollar. The result, said Mr. Shenfeld in a recent commentary, was to stimulate housing development through low interest rates but put a damper on Canadian exports by maintaining a “seriously overvalued” dollar.

Instead of letting the Canadian dollar float, a keystone of Canadian economic policy, Mr. Shenfeld implies the Bank of Canada should have intervened to drive down the dollar. By failing to push the value of the dollar lower, Mr. Carney created an environment in which Canadian manufacturers were discouraged from making long-term investments in plants and were even shuttering them for good.

via Financial Post

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza

@alfonso_forex

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