“As Canada’s central bank we set policy for broad-based growth and recovery”…
The Sherwood Park Chamber of Commerce was pleased to attend a virtual address from Bank of Canada Governor Tiff Macklem to the Canadian Chamber of Commerce yesterday morning. Governor Macklem was speaking to the recent announcement from the central bank to maintain interest rates at 0.25%.
“As the economy shifts from reopening to recuperation, we will continue to need extraordinary monetary policy support. This is how we can help bring the economy back to capacity and help people get working again. The governing council will hold the policy interest rate at the effective lower bound until economic slack is absorbed, so that the inflation target is sustainably achieved.”
The central bank is taking a “Quantitative Easing” (QE) approach, a tool to increase the money supply by making purchases of government bonds and securities – something that the US Federal reserve is also using. The Bank of Canada is pursuing large-scale asset purchases of at least $5 billion per week of Government of Canada bonds. QE is a relatively new tool for central banks to use, and its effectiveness is still being assessed.
In July, the Bank of Canada noted the recession and recovery playing out in 3 phases with COVID-19: containment, reopening, and recuperation. They expected that the recuperation phase would be “slower and bumpier” than the stronger reopening phase, however, Canada has since seen a stronger than expected recovery. By August, around two-thirds of jobs were regained that were lost in March/April, which is encouraging. However, the is a long road to recovery, and while many sectors have seen rebounds, service sectors like restaurants, retail, and travel were devastated. Air transportation in June was down 94% from February.
Governor Macklem noted incomes have been much less affected than employment, thanks to programs like the Canadian Emergency Response Benefit.
In response to the Bank of Canada’s interest rate announcement, the Conference Board of Canada stated:
“Today’s release supports our forecast that interest rates will remain rock bottom beyond the short-term. We anticipate the Canadian economy will not fully recover from the COVID-19 crisis until late 2022, encouraging the central bank to hold its policy interest rate at 0.25 per cent until 2023.”
The economic recession that Canada, and the world, has faced as a result of COVID-19 has been unprecedented, and while it will take time for a full recovery, some promising signs are on the horizon. We at the Sherwood Park & District Chamber of Commerce understand that these have been very difficult times for business. For more information on how we can help provide support for your business or to become a member, visit https://sherwoodparkchamber.com/.