Bank of Canada Governor Tiff Macklem has warned that Canada’s economic recovery from the COVID-19 pandemic will take a long time and said that the central bank is ready to provide additional support, if needed.
"The recovery has started, and we’re seeing some good numbers, but it’s going to be a long climb back," said Macklem after the Bank of Canada announced that it is holding its benchmark interest rate at 0.25% and made it clear it’s in no rush to move off that level.
"Considerable policy support is going to be required. Fiscal policy is taking a lead, but monetary policy has an important complementary role to play, and we wanted to be clear to Canadians that the Bank of Canada is going to be there through the full length of the long climb back," said the central bank governor.
He also said that the central bank’s key interest rate will remain where it is for at least two years. "There’s a lot of uncertainty around that scenario, but I think the message is pretty clear, interest rates are going to be very low for a long time."
And, the Bank of Canada is prepared to add more stimulus, if required, a policy that Macklem said was made clear in the latest Monetary Policy Report issued on Wednesday.
"The purpose of putting out a central scenario is that — even though there is considerable uncertainty around it — it is the scenario that guided us in our policy deliberation," he said. "As data comes in we’ll be evaluating that relative to that central scenario. If we need more monetary stimulus, we’ll do that."
Macklem highlighted Canadians’ high level of household indebtedness as a longstanding concern for the Bank of Canada but expressed optimism that the economic recovery could prove to be a rising tide.
"The best predictor of whether somebody is going to pay their mortgage is whether they have a job," Macklem said. "Yes, high household indebtedness is a vulnerability, but supporting the recovery and reducing that vulnerability are entirely aligned."
Related Stories
