Deputy Governor of BoC Rebuts Fears about Fed Tapering

The Deputy Governor of Bank of Canada, John Murray, mentioned during a recent speech on Tuesday that eventual removal of its monetary policy stimulus by the U.S. Federal Reserve shall be viewed positively, while rebutting all critics that anticipated Fed tapering to generate negative effect around the world. Murray explained that whenever Fed begins winding down its unconventional monetary policy, it will be in return promising an alternate strengthening U.S. economy and benefits of that for the Canadian economy will outweigh any risks.

Murray stated during the speech that “the improving underlying strength of the U.S. economy should more than compensate for the drag from higher interest rates. Stronger external demand, coupled with downward pressure on our currency and support for commodity prices from a global economic recovery, will provide the lift.” The Fed has already stated that it is planning to initiate reduction of its massive bond purchase program by the end of this year, while it hopes to end the procedure till the mid of 2014.

The president of the Federal Reserve Bank of Atlanta, Dennis Lockhart, mentioned at the annual Jackson Hole policy retreat for the world’s central bankers on Saturday, that tapering is planned to begin in September in case there is no “really worrisome” economic news between now and then.  Speaking of which, Murray alleged that “before getting too excited about the negative consequences of exiting, it is important to step back and consider why events might unfold in a manner that is more benign than some critics have feared.”

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