Thiessen says U.S. demand for exports will stay strong

OTTAWA — Bank of Canada Gov. Gordon Thiessen said he expects “sustained” economic growth in the months ahead because of strong U.S. demand for Canadian exports.

In comments at a central bank directors’ meeting on Oct. 29 and echoed during a speech in Victoria this week, Thiessen said that while global growth prospects have “weakened” because of economic slowdowns in Japan and other Asian countries, U.S. domestic demand will “probably remain at relatively high levels.”

“Domestic demand was expected to expand less rapidly in the second half of 1998 because of the damping effects on consumer and business confidence of the ongoing global uncertainty and nervousness in financial markets,” he said.

However, economic activity in Canada should be sustained over the near term “given U.S. demand for Canadian products and our improved competitive position,” Thiessen noted. “Net exports should continue to contribute to output growth in Canada.”

Recent interest rate cuts by the Federal Reserve have helped spur U.S. demand, he said.

Since late September, Canada’s central bank has mirrored cuts by the Fed, dropping its overnight lending rate by 25 basis points three times to a rate of 5.25%. The move have nearly erased the 100 basis-point increase enacted in late August to help the Canadian currency.

“Unlike the situation in August, when the Canadian dollar and other so-called commodity currencies were in the spotlight after the events in Russia, our currency was on the sidelines through much of the turmoil in financial markets that occurred in September and early October,’ Thiessen said.

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