Following his grilling in London last week, outgoing Bank of Canada Governor Mark Carney may be in for a second round of tough questioning Tuesday, this time from Canadian MPs.
On monetary policy, Carney is likely to be asked why the central bank had been so wide off the mark on its growth forecasts for the second half of 2012, and if the most recent estimate of a two-per-cent advance this year could also be an overshot, given recent underwhelming data.
The governor will also likely be grilled on his decision to depart for a bigger pond while the Canadian economy is still fragile and over reports he was approached to run for the Liberal leadership at the same time he was vacationing with Liberal finance critic Scott Brison.
Few expect the Canadian hearing will be as grueling as last week's near four-hour marathon before a panel of British MPs. That session began with the chairman bluntly asking Carney to explain why he at first turned down the Bank of England job, then changed his mind, followed by whether he was worth $1.3 million a year.
The economy in the United Kingdom continues to drag along the bottom — having already suffered through a double-dip recession — and now faces the possibility of the third extended period of contraction.
The Bank of Canada has been at the upper end of the forecast consensus for most of the past year, particularly for the last two quarters of 2012.
Although the bank did a mea culpa in January, last week's trifecta of bad economic news — outright job losses, lower exports volumes and plummeting housing starts — casts further doubt on the bank's 2.3% call for the first quarter of this year, and also the 2% forecast for 2013 as a whole.
Another sour development, to some economists, is the suddenly ice-cold Canadian housing sector. Carney supported the government's clamp-down on mortgage rules in July to slow down household debt accumulation, particularly on mortgages.
But the correction may be more than Finance Minister Jim Flaherty and Carney bargained for. On Friday, Canada Mortgage and Housing Corporation reported that housing starts collapsed to 160,600 annualized for January, a 19% tumble in one month.
Carney could also face question about the impact of falling oil prices on the economy.
Last week, Flaherty told reporters lower commodity prices were starting to have a detrimental impact on government revenues.
According to Bank of Canada research on the deficit between what Canadians pay for oil and what Alberta producers receive, it can be as high as $40 a barrel at times.
