mark carney : opening statement before the house of commons standing committee on finance – april monetary policy report opening statement by mr mark carney, governor of the bank of canada and chairman of the financial stability board, before the house of commons standing committee on finance, ottawa, 23 april 2013. * * * good morning. tiff and i are pleased to be here with you today to discuss the april monetary policy report, which the bank published last week. • global economic growth has evolved broadly as anticipated in january. • in the united states, the economic expansion is continuing at a modest pace, with gradually strengthening private demand partly offset by accelerated fiscal consolidation. • significant policy stimulus has been introduced in japan. • europe, in contrast, remains in recession, with economic activity constrained by fiscal austerity, low confidence and tight credit conditions. • after picking up to very strong rates in the second half of 2012, growth in china has eased. • commodity prices received by canadian producers remain elevated by historical standards and, despite recent volatility, overall they are little changed since january. • the bank expects global economic activity to grow modestly in 2013 before strengthening over the following two years. • following a weak second half of 2012, growth in canada is projected to regain some momentum through 2013 as net exports pick up and business investment returns to more solid growth. • consumer spending is expected to grow at a moderate pace over the projection horizon, while residential investment declines further from historically high levels. growth in total household credit has slowed and the bank continues to expect that the household debt - to - income ratio will stabilize near current levels. • despite the projected recovery in exports, they are likely to remain below their prerecession peak until the second half of 2014 owing to restrained foreign demand and ongoing competitiveness challenges, including the persistent strength of the canadian dollar. • on a quarterly basis, growth in canada is expected to pick up to about 2. 5 per cent in the second half of this year. despite this expected pickup, with the weak growth in the second half of 2012, annual average growth is now projected to be 1. 5 per cent in 2013. the economy is then projected to grow by 2. 8 per cent in 2014 and 2. 7 per cent in 2015, reaching full capacity in mid - 2015. this is later than anticipated in january. • total cpi and core inflation have remained low in recent months, broadly in line with expectations in january. muted core inflation reflects material excess

faith determination that the borrower can repay the loan. many of the rules ’ requirements for verification of income, assets, and other payment obligations are probably standard practice for lenders today. but having the rules in place, reinforced with increased legal risk for lenders that do not meet the rules ’ requirements, helps ensure that these practices continue, even as the economy improves and competition heats up. borrowers who cannot afford their loans can sue the lender for violations of the ability - to - repay rules and claim monetary damages. if the original lender sells or securitizes the loan, the borrower can claim these damages at any time in a foreclosure action taken by the lender or any assignee. if the mortgage meets the qm standard, however, the lender receives some degree of protection from such potential lawsuits because it is presumed that the borrower had the ability to repay the loan. loans outside the qm box may become more costly for lenders and borrowers for at least three reasons. the first reason is the possible increase in foreclosure losses and litigation costs. although the expected losses from this litigation are likely to be small, the full extent of the costs and of lenders ’ legal liability will become known only after the initial round of abilityto - repay suits are settled by the courts. the second reason is that mortgages that do not meet the qm definition also, by definition, will not meet the future qrm standard, and so bis central bankers ’ speeches lenders will be required to retain some of the risk if these loans are securitized. this requirement may increase costs and limit the size of the market. the third reason is that investors may be wary of investing in securities collateralized by non - qm loans because it is difficult to gauge the risks. a borrower ’ s ability to repay a loan that is not a qm may be based on “ soft ” information or on idiosyncratic factors that are difficult for the investor to observe or monitor. investors may respond to this information asymmetry by requiring a higher risk premium or by refusing to purchase these securities altogether. for all of these reasons, the non - qm market could become small and illiquid, which would further increase the cost of these loans. loans eligible to be purchased, insured, or guaranteed by fannie mae, freddie mac, the federal housing administration ( fha ), the u. s. department of veterans