Bank of Canada Governor Tiff Macklem sent a clear message with Wednesday's Monetary Policy Report: Economic recovery from the COVID-19 pandemic is the central bank’s top priority.
“The recovery has started, and we’re seeing some good numbers, but it’s going to be a long climb back,” Macklem told BNN Bloomberg in an interview Wednesday, just hours after the Bank of Canada held its benchmark interest rate at 0.25 per cent 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.”
He also said that the central bank is prepared to add more stimulus, if required, a policy he says was made clear in the Bank of Canada’s central scenario issued with Wednesday’s MPR.
“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 confidence that 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.”
“By holding interest rates low across the yield curve, that will reduce debt burdens for Canadians.”
While Macklem said the central bank “didn’t put [its] forward guidance on a calendar,” its central scenario indicates that the 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,” he said. “Interest rates are going to be very low for a long time.”
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