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(CEP News) Ottawa - The Bank of Canada received a pat on the back Friday from CIBC economist Avery Shenfeld, who said Canada's central bank anticipated the current economic slowdown and poured in enough stimulus to keep it functioning well.
BOC Governor Mark Carney can take the rest of the year off, Shenfeld wrote in an economic paper, "because in terms of helping the economy through its soft patch, your work was done way ahead of the game." On the surface, Canada's latest GDP numbers, showing 0.3% annualized growth in the second quarter, appear to put the country "in the same boat as other developed economies that are faltering and facing rate cuts ahead," Shenfeld said. "But real GDP doesn't tell the whole story." Resource exports are keeping incomes and corporate profits strong in Canada and, while there have been significant layoffs in the past two months, the jobless rate remains low by historical standards, he said. There are still substantial risks to Canada's economic growth ahead, Shenfeld said, but Canada is faring better than most other industrialized nations. The key reason, he says, is that Governor Carney and the Bank of Canada, "unlike central banks in Australia, the U.K. and the euro zone ¥ saw the slowdown coming. While those overseas bankers were hiking, or leaving rates at restrictive levels, the Bank of Canada was slashing the overnight rate from 4.5% last November to 3% by April." Because of that, he said, there is little sign that Canadians are shying away from borrowing, with household credit up 12% from a year ago, and business credit up 6%. "Canada's economy needed a helping hand from lower interest rates," Shenfeld said. "But at this point, the Bank of Canada can pat itself on the back from having anticipated that need, and can sit tight until growth picks up again in 2009." By Geoff Matthews,
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