OTTAWA - Bank of Canada governor David Dodge says he thinks the Canadian economy will weaken in the fourth quarter of this year and the first half of next year before recovering later in 2008.
Dodge was testifying for the last time before the Senate banking committee. He retires as head of Canada's central bank in January
He told the committee that the major risk for the economy is weaker demand in the United States for Canadian exports.
Dodge said the Bank of Canada's decided to reduce its key overnight interest rate on Tuesday because of were worsening difficulties in the financial markets and anticipated losses in the U.S. subprime mortgage market.
He said the bank will reassess all these factors for the next rate decision on Jan. 22.
That will be the last time Dodge, who has been governor the past seven years, will have a hand in setting monetary policy for the bank. His successor, Mark Carney, takes control of the bank reins on Feb. 1.
