Interest rates likely to stay low, says Poloz

BoC governor predicts less room for central banks to maneuver, says talk of coronavirus damage 'a little too dire'

Interest rates likely to stay low, says Poloz

The low-interest rate environment will probably persist for the foreseeable future, according to the head of Canada’s central bank.

In a video press conference on Thursday, outgoing Bank of Canada Governor Stephen Poloz told reporters that demographic and economic growth factors are likely to keep interest rates depressed, according to Reuters.

“I don’t know how low really but they’re just not going to be like where they were 20 years or 30 years ago,” Poloz said. “So central banks will have less room to maneuver.”

To help prepare for the next shock, he said making a Canada Emergency Response Benefit (CERB)-like support mechanism part of the government’s toolkit could be helpful, as per the Canadian Press.

Citing Canada’s negative overall inflation rate in April, Poloz said that the central bank will “be easier for longer” in line with its 2% inflation-targeting policy.

He also remarked on the damage the COVID-19 pandemic could inflict on the economy, saying that some comments have been “a little too dire.”

Attributing the current decline in economic growth to shutdowns rather than behavioural factors, he maintained that production should revive quickly after business closures link to the outbreak are lifted.

He estimated that the country remains on pace to meet the BoC’s best-case scenario wherein the second quarter would see a 15% reduction in economic growth compared to Q4 2019.

Responding to a question about a possible second wave of coronavirus infections, Poloz said it could inflict damage similar to the central bank’s worst-case scenario, which would have second-quarter GDP plummet by 30% from the last quarter of 2019.


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