Bank of Canada Says Growth is Slower Than Expected and May Slip Further Into Year End

“Bank of Canada Senior Deputy Governor Tiff Macklem, who may be promoted to lead the central bank later this year, said economic growth is slower than expected and will accelerate later this year.

There are early signs of a “gradual correction” of imbalances in household finances such as record debt loads while exports continue to have the slowest recovery since World War II, Macklem said yesterday in a lecture at Queen’s University, his alma mater, in Kingston, Ontario.

“Near-term momentum now appears to be slightly softer than previously anticipated,” Macklem, 51, said in the last scheduled public remarks from a Bank of Canada policy maker before a Jan. 23 interest rate decision. “We continue to expect economic activity to pick up through 2013.”

The central bank’s key interest rate has been at 1 percent since September 2010 with a strong currency and inconsistent global demand blunting exports, and policy makers have signaled since April they may raise borrowing costs as the economy moves to full output. Macklem’s household-finance comments suggest the language about interest rates will be retained this month to limit further growth in consumer debt, said Michael Gregory, senior economist at BMO Capital Markets in Toronto.

The wording “will be retained even though the Bank’s economic projection will be downgraded,” Gregory said. “More work is obviously needed” on consumer debt, he said.

Economists surveyed by Bloomberg News predict a rate increase in the fourth quarter of 2013, a time frame that may put the decision in Macklem’s hands with Governor Mark Carney leaving in June to lead the Bank of England…..”

Full article