'Canadians deserve credit for not taking credit': CIBC's Tal
CIBC deputy chief economist Benjamin Tal praised the Canadians who have resisted the lure of debt as the country’s central bank once again held its key interest rate steady at 1.75 per cent.
“Today credit is rising, almost at the slowest rate in any non-recessionary period over the past 50, 60 years,” Tal told BNN Bloomberg in a Wednesday interview. “So you have to be in a recession to see debt rising so slowly.”
“So much for this ‘booming debt market.’ That’s not the case,” he added. “In fact, many Canadians deserve credit for not taking credit.”
The Bank of Canada struck a positive tone on Wednesday as it held its benchmark interest rate at 1.75 per cent, noting in a statement that there is “nascent evidence that the global economy is stabilizing.” However, the central bank added it would continue to “monitor the evolution of financial vulnerabilities related to the household sector.”
Tal said the bank’s positive focus is likely the result of a nine per cent year-over-year uptick in business investment, noting that the bank also revised its GDP projections for the first half of 2020 to reflect better-than-expected growth.
“This central bank is telling you: ‘Listen, the economy is doing fine. Don’t worry. We are not doing anything anytime soon,’” Tal said. “At least that’s what they’re thinking now.”
However, Tal pointed to potential complicating factors that could make the Bank of Canada change its tune.
“At this point if you asked [Bank of Canada Governor, Stephen] Poloz, I’m sure that he would tell you: ‘I don’t think I’m going to cut,’ but of course things can change,” Tal said. “If we get some bad news from the trade [front] or we have another reason: For example, if the [Canadian] dollar is going up.”