Canada's economy should recover from the challenges of 2003 by the end of the year and enjoy a strong 2004, Bank of Canada Governor David Dodge said Wednesday afternoon during a speech in Vancouver.
"Despite current weakness, the accumulation of economic evidence to date reinforces the bank's view that growth in the Canadian economy will strengthen towards the end of 2003 and through 2004," Dodge said in prepared speech before the Vancouver Board of Trade.
His comments come a week after the central bank cut its key overnight lending rate by a quarter of percentage point to stimulate an economy plagued by the outbreak of the SARS virus, the mad cow scare, a surging loonie and raging B.C. forest fires.
The cuts left the central bank's key rate at 2.75 per cent, erasing two increases made earlier in the year.
Dodge's speech also followed a lacklustre employment report for August released by Statistics Canada last Friday.
In its latest Labour Force Survey, Statscan reported that the economy lost 19,000 jobs last month and the jobless rate edged up to eight per cent.
The general expectation among analysts was for the rate to hold steady at 7.8 per cent and the economy to add about 5,000 new jobs.
But Dodge said the labour data shows where the economy as been, not where it is going and suggested no further rate cuts will be necessary to bolster the economy.
"We have made it very clear that if things turn out as we think that existing interest rates will provide sufficient support for demand growth in Canada that is appropriate," Dodge said. "But conditions may change, obviously."
Some economists have speculated that the August labour report could spark another rate cut from the central bank.
Dodge said the bank expects economic growth will have remained weak in the third quarter and core inflation will remain well below the target rate of two per cent for some time.
In the second quarter, gross domestic product, the broadest measure of economic activity, fell by 0.3 per cent.
The core rate of inflation is a key economic barometer for the central bank. It excludes energy and food prices, which are prone to high levels of volatility on a monthly basis.
The Bank of Canada has two more interest rate announcements on the calendar for 2003 - Oct. 15 and Dec. 2.
