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Pattie Lovett-Reid

Chief Financial Commentator, CTV


Newly-minted Bank of Canada Governor Tiff Macklem made it clear in his address to the House of Commons Finance Committee earlier this week that  "we're in a deep hole, and it's going to be a long way out of this hole." 

He went on to say he has no intention of raising interest rates for the foreseeable future. 
This is a good-news, bad-news scenario. Clearly Macklem believes it’s going to take longer for the economic recovery to happen and lower rates will help the families and businesses who have had to take on debt service it. 
But it’s also a little worrisome. 
The consumer has been the backbone of the economy, while debt levels have continued to escalate higher. Digging out of this "hole" for many is going to take time. And as the economy begins to open, it can't be the consumer who continues to do the heavy lifting. They are tapped out. 
A signal of lower rates from the Bank of Canada is not a green light to encourage more debt;  it’s more of a yellow cautionary light to proceed with caution. 

 Those who can spend should be encouraged to spend and support the Canadian economy where they can. Buy Canadian, buy local and buy quality to support the economy. 
However, if you’re straddling the break-even line and believe lower rates for longer is the opportunity to spend money you don't have, I would argue that’s not what this economy needs. 
My hope is that Canadians who have racked up debt in this low-interest rate environment will realize it is far more satisfying to have a solid personal financial foundation that gives them a little flexibility should the unexpected happen again. 

Let's hope corporations with the balance sheet to support investment pick up the baton and take over from where the consumer left off.