OTTAWA -
Bank of Canada governor Mark Carney is warning that Canada and the world are suffering through the worst economic downturn in half a century, but he's also cautioning against over-reaction by governments trying to fight the global recession.
"In the coming months, there may be pressure for policy to do more," he told a business audience in Yellowknife on Wednesday.
But such decisions need to be taken with an "eye to the scale of what has already been done" and that it takes time for fiscal and monetary stimulus to work, he added.
Carney said he will outline possible further economy-boosting measures to get more money into the financial system in three weeks, but he stressed that should not be interpreted as a signal the bank will go ahead with so-called quantitative easing.
That's a technical term for the central bank printing more money or buying bonds and other assets to pour billions of additional dollars into the economy to free up credit markets and encourage companies to invest and expand and consumers to spend.
In a question and answer segment following the speech, Carney was more direct in his warnings, particularly to foreign governments meeting at the G20 conference in London.
"People need to be careful about doing too much, too soon, relative to their fiscal capacity," he said.
The comments come a day after the Organization for Economic Co-operation and Development suggested that governments, singling out Canada and Germany, should do more to try and arrest the worst economic meltdown since the Second World War.
And they appear at odds in tone to Prime Minister Stephen Harper's initial message to G20 leaders meeting in London that the dangers of under-reacting are greater than piling on too much stimulus, saying countries should in fact "overeact" to the crisis.
Economists say that while stimulus spending will help create jobs and ease the impact of recession, too much of it will lead to massive budget deficits and ignite inflationary pressures that could lead to higher interest rates and weaker growth in the future.
Carney has faced considerable grief and second-guessing for appearing to be relatively rosy in his last official forecast in January.
