Bank of Canada's Wilkins says fiscal policy useful tool -Maclean's

TORONTO, April 20 (Reuters) - Fiscal policy is more
effective than monetary policy in boosting productivity and
growth when interest rates are low, Bank of Canada Senior Deputy
Governor Carolyn Wilkins said in an interview published on
Wednesday.
In the interview with Maclean's magazine, Wilkins said it
was a good thing that the federal government had implemented
fiscal stimulus because lowering interest rates even further
than Canada has done increases risk in financial markets.
"There are concerns about the effects of persistently low
interest rates and the quantitative easing that other countries
have done, in terms of increasing risk-taking by financial
market players and individuals," Wilkins said.
"If fiscal policy can do some of the heavy lifting, that's a
positive thing. Fiscal policy at low interest rates is also just
more effective. In a world where growth is going to be
structurally slower because of demographic changes, monetary
policy can't fix that," she added.
The Bank of Canada held rates steady last week, saying the
fiscal stimulus that is coming from the new Liberal government
will boost economic growth. Without the federal spending
revealed in the government's March budget, the central bank
would have considered cutting rates again from the current 0.5
percent, officials said last week.
The statements by the bank in its April Monetary Policy
Report and by Bank of Canada Governor Stephen Poloz afterward
were seen as supportive of the Liberal government's decisions to
run big budget deficits, and some observers questioned the
bank's independence.
But Wilkins said in the Maclean's interview the Bank is
trusted to give its best views on issues, and it should be clear
that central banks can not fix every problem.
"Monetary policy works to affect demand, and it's something
that is needed to ensure low and stable prices. At the same
time, it's not the only game in town," she said.
"I like the fact there is increased recognition that other
policies, like fiscal policy, like structural policies, can be
brought to bear to underpin Canada's macro economy, and global
economies in general."
Poloz and Wilkins will appear later on Wednesday before the
Senate Standing Committee on Banking, Trade and Commerce, where
lawmakers will likely press them on the strength of the Canadian
economy and the appropriate level for the Canadian currency.