Business

Bank of Canada Governor pins hopes on US bank plan

08:18 am on 15 February 2009

The head of the Bank of Canada says success or failure of a bank rescue plan in the United States will determine whether Canada can pull out of a recession later this year.

After hearing more details of the plan from US Treasury Secretary Timothy Geithner during a G7 meeting in Rome, Governor Mark Carney said on Saturday it was impossible to have an opinion on whether it would work.

He said "the next couple of months" will be very important.

The central bank has predicted the Canadian economy will start growing again in the third quarter of this year.

A precondition for that to happen is a stabilization of the global financial system - starting with the United States.

Mr Geithner issued a plan on Tuesday for absorbing up to $US1 trillion in bad assets held by US banks.

Canada posted its worst job losses on record in January and its first trade deficit in nearly 33 years in December.

Mr Carney describes the data as" really ugly right now."

The bank has cut its key interest rate by 350 basis points since December 2007 to 1% - its lowest for 50 years. Economists expect another cut in March.