If you're hoping to see cuts to interest rates this year it is unlikely to happen, former Bank of Canada governor Mark Carney said in an exclusive interview with BNN Bloomberg.
While the fight against inflation sparked a series of aggressive interest rate hikes worldwide, the cost of living remains too high to reverse course, Carney told BNN Bloomberg in an interview that aired Friday.
“I don’t think it’s likely at all that central banks are going to be cutting rates later this year,” Carney, who is also a former governor for the Bank of England, stated.
For it’s part, the Bank of Canada communicated that it intends to keep rates on hold after it’s eighth consecutive hike on Jan. 25. The central bank hiked its overnight lending rate by 25 basis points, which brought it to 4.50 per cent. The bank is now sitting on the sidelines as it awaits for further evidence of a substantial economic cooldown.
Carney pointed to evidence of economic activity slowing as promising, but noted the economy still has momentum, which does not justify rate cuts. This, coupled with the risk of a re-acceleration in inflation, poses too much of a danger for central bankers to cut rates at a time when they’ve worked so hard to stay the course, he explained.
“(Inflation) is still too high, without question. Monetary policy needs to be tight and central banks are going to need to maintain restrictive policy for a period of time in order to get inflation all the way back,” Carney said.
Despite this challenging economic environment, Carney does not believe the world is living through a repeat of the 2008 and 2009 financial crisis.
"This is not 2008. It's about rebalancing aggregate supply and demand (in North American and European economies)," he said.
He noted that it’s likely economies will slow to flat growth, which would ultimately lead to a relatively shallow recession.
“The recession obsession, if you will, is overplayed,” Carney said.
Advertisement