Deputy governor Tim Lane reflects on the decisions made by Canada’s central bank during the turbulence of the pandemic
It was two years ago that the world was waking up to reality of the virus that had been killing people in a single Chinese province.
While the health implications of the COVID-19 pandemic were the stuff of disaster movies, the economic fallout far exceeded expectations; one that required the Bank of Canada (BoC) to take some unprecedented actions.
Speaking Wednesday to an audience at the University of Calgary, BoC deputy governor Tim Lane highlighted the rollercoaster of challenges and decisions that define the economic landscape since 2020.
With inflation raging right now, it’s easy to forget that it slumped to around zero in the early days of the pandemic, with GDP down sharply, and millions of Canadians put out of work.
This required BoC action to stop a sharp drop in spending and investment by households and businesses and to prop up the financial markets.
“Uncertainty may call for a cautious and gradual approach when entering uncharted territory—but as the pandemic has illustrated, there are times when policy-makers must act boldly,” the deputy governor said.
Learning for the future
Lane noted the learning that had been achieved in the past two years, ensuring that the BoC can take similar bold action when situations demand it.
“Although uncertainty can’t be eliminated entirely, taking bold risks at the outset paid off. And being clear in our communication gave Canadians confidence in our ability to manage a situation like no other,” he said.
Evolving the response as conditions changed was key to the central bank’s policymaking, Lane told the School of Public Policy, especially as things did not always turn out as they had expected.
Bold or forceful
In conclusion, Lane said that while much had been learned, “we must anticipate the possibility of more surprises before this chapter is closed.”
Although the BoC is expecting an easing of the supply disruptions seen in recent months, inflation remains a central concern, especially after the latest Statistics Canada data showed a three-decade high for consumer prices.
“We will be nimble—and if necessary, forceful—in using our monetary policy tools to address whatever situation arises, as we have done throughout these turbulent times,” he said.
