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Harper backs Bank of Canada rate cut; no fiscal stimulus planned
[ST CATHARINES, Ontario] Canadian Prime Minister Stephen Harper voiced complete confidence in the Bank of Canada on Thursday, a day after it stunned markets by cutting interest rates amid a plunge in oil prices.
Harper also tried to play down the effects of the slide in crude prices and repeated a promise to balance the budget in 2015/16, an important political move ahead of an election set for October.
Canada is one of the world's major oil producers and the slump in prices, by around 60 per cent since June, will knock billions from government revenues.
Harper said the economy did not need stimulus measures and noted the Bank of Canada was still predicting some growth this year.
The central bank cited a threat to economic growth and its inflation targets from the oil price plunge and said it was ready to ease policy further if necessary. "The government has complete confidence in the Bank of Canada and the actions that it has taken," Harper told reporters in the Ontario city of St. Catharines. "They are appropriate but in terms of fiscal policy the appropriate action is to make sure that as long as the economy continues to grow, we balance our budget," he said.
The center-right ruling Conservatives say they are the only party that can be trusted with the economy and point to a massive stimulus program the government quickly rolled out to stave off the worst effects of the 2008 Recession.
That program racked up a multi-billion dollar budget deficit which the government is committed to erasing as voters go to the polls in October. "We live in a world of volatility. These things are creating some shocks that will impact us but they're not going to throw us off our fundamental growth path or undermine the very strong fundamentals of the Canadian economy," said Harper.
The Conservatives' main power base is in the western province of Alberta, which is also home to much of the country's energy industry. Harper said the energy patch was resilient and used to price shocks. "I have every confidence that the industry will weather the storm - with some difficulty, there's no doubt about it, there will be some pain - but they will emerge very strong for the long term," he said.