Flaherty, Carney to offer clues on economy

By David Ljunggren and Randall Palmer, REUTERS

OTTAWA – Policymakers could provide important clues about spending plans and interest rates Friday when a rare midsummer parliamentary committee meeting examines market instability and foreign debt crises.

Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney will testify to the House of Commons finance committee, which is looking into the impact on Canada of foreign economic turmoil.

Parliament only returns from its summer break on Sept 19, but opposition legislators — particularly the left-leaning New Democrats — said they could not wait till then.

Flaherty said in a radio interview over the weekend that he would consider more stimulus measures if the economy slips into recession, a change from a previous promise to stick to plans to eliminate its budget deficit by 2014-15.

“I welcomed any kind of flexibility on behalf of the government. We had not heard that before,” said Peggy Nash, finance spokeswoman for the New Democrats, urging Flaherty to explore the idea of fresh infrastructure investments.

Flaherty’s office was not immediately available for comment.

Doug Porter, deputy chief economist at BMO Capital Markets, said Flaherty and Carney would most likely use the appearance “to soothe concerns on the outlook and play up Canada’s relative strengths.”

But the session also gives Carney, who had not been publicly scheduled to speak until late October, a chance to update central bank thinking on interest rates.

The bank signaled on July 19 it was closer to raising rates, although only if the economy continued to advance.

Since then a ream of gloomy data has shown that the economy most likely stalled in the second quarter, and markets no longer expect a rate hike in the foreseeable future.

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