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Mark Carney, Governor of the Bank of Canada, holds a press conference to discuss the contenets of the Monetary Policy Report at the National Press Theatre in Ottawa on Wednesday, Oct. 20, 2010. THE CANADIAN PRESS/Sean Kilpatrick (Sean Kilpatrick/THE CANADIAN PRESS)
Mark Carney, Governor of the Bank of Canada, holds a press conference to discuss the contenets of the Monetary Policy Report at the National Press Theatre in Ottawa on Wednesday, Oct. 20, 2010. THE CANADIAN PRESS/Sean Kilpatrick (Sean Kilpatrick/THE CANADIAN PRESS)

In private, Mark Carney offers a less rosy outlook Add to ...

Mark Carney gave a few members of the public an unusually candid glimpse into his thinking at a private dinner Wednesday night, during which he said people should not judge how well Canada emerged from the recession for years because the financial crisis is not really over.

Speaking at a fundraising event held by the United Jewish Appeal Federation of Greater Toronto, Mr. Carney, the Bank of Canada Governor, painted a stark picture of the global rebound. He also suggested that America's deficit troubles - which he warned this week could threaten Canada's economy - would probably not be addressed until after next year's presidential election.

Those assertions are not particularly outlandish to anyone who has closely followed economic news on either side of the Canada-U.S. border. But the statements were more blunt than Mr. Carney tends to be when knows his comments are fair game for public consumption - which is why, despite the presence of economists and Bay Street types, the invitation to the dinner stipulated that the comments should be "off the record."

To the central bank's chagrin, one attendant failed to notice that condition until Thursday morning, moments after he e-mailed a synopsis of Mr. Carney's refreshingly revealing remarks to a long list of clients.

"He doesn't see the U.S. as addressing its fiscal issues until after 2012, and is concerned that the bond market isn't sending America the signal that it needs to act due in part to huge central bank holdings of Treasuries," Avery Shenfeld, the chief economist at CIBC World Markets, said in the widely circulated note.

"The tone was generally pessimistic on developed economy prospects, saying that we are still in the financial crisis (likely alluding to the hangover from fiscal stimulus in terms of sovereign debt, and the U.S. housing mess), and that judgments on how well Canada came through it should probably not be made until we can look back five years from now."

Once he realized his mistake, Mr. Shenfeld asked those receiving his initial e-mail not to cite it. But the cat was out of the bag, and other economists at the session confirmed the account.

The incident illustrates the dicey issue of transparency for central bankers such as Mr. Carney, who operates at arm's-length from his political masters in Ottawa. The comments about Canada's recovery run counter to some of the more triumphant rhetoric of the Conservative government, which recently won a majority on a platform of sound economic management in the downturn.

Bank of Canada spokesman Jeremy Harrison said it's important that senior officials of the central bank meet with Canadians to explain what they do, and to get their feedback. Often, he said, events such as the one Wednesday night are closed to media so there can be a "frank and open" exchange. But even then, he noted, "any comments by bank officials on these occasions will reflect views that have already been communicated publicly."

Mr. Carney has often said that a full recovery from the financial crisis and the global downturn will take many years, if not decades. Plus, given his repeated warnings about household debt in Canada and a comment earlier this week that "fiscal consolidation" in the United States must start now or trading partners such as Canada could be at risk, his caution on the domestic economy isn't exactly shocking.

Another comment, that it will be a long time before there is "meaningful" monetary policy tightening in the United States, wasn't exactly new, either, since most economists see the U.S. Federal Reserve staying on hold until the end of 2012 or later.

"At the end of the day it was a 99-per-cent repeat of what [Mr. Carney]has said in the past," another economist who was at the dinner said in an interview.

Mr. Carney indicated in a speech Monday that he is increasingly worried about the potential impact on Canada's economy should big trading partners fail to tackle their deficits and debts before borrowing costs spike.

Still, he has never clearly stated that he doesn't see politicians in Washington getting a handle on the problem until after the election cycle. Such a blanket statement by a Canadian central banker about the perceived lack of political will in the U.S. capital - regardless of how obvious it may seem even to casual observers - is uncommon. "That's probably why it was off the record," said another economist who was at the dinner and asked to not be identified. "There is, I guess, no certainty that it will get done in the next couple of years before the next presidential election and the risk is that it gets delayed until afterwards, and I think the bank sees that risk too."

Typically, when Bank of Canada officials are speaking privately, their underlying message rarely strays from what they say in public, said Sébastien Lavoie, a senior economist at Laurentian Bank in Montreal who worked at the central bank from 2000 to 2003.

With files from Tavia Grant in Toronto

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