By Adam Bernards
TORONTO (MaceNews) – Bank of Canada Governor Stephen Poloz said interest rates in Canada and around the globe are likely to remain low for the foreseeable future as trade uncertainty and structural factors continue to cast a shadow on otherwise positive economic trends.
“On balance, it looks like the global economy is set for continued slow economic growth for mostly structural reasons. For these same reasons, this means that low interest rates are likely to persist too,” he said during an appearance here Thursday.
In Canada, though, the economic outlook is positive enough to likely stave off any drop in inflation in the near future.
“Despite all of that, Canada’s economy is operating close to capacity, inflation is on target, labor force participation is up across almost all age groups, and the jobless rate is near historic lows,” he says.
However, noted Poloz, a sustained period of low interest rates is not without its risks. In Canada, rising household debt, which currently sits at more than 177% of disposable income for Canadians, is a consequence that will have to be monitored and addressed in time.
“In Canada, household indebtedness is our most important financial vulnerability,” said Poloz, though noting that despite this vulnerability, thanks to stricter guidelines on certain types of lending, these high levels of indebtedness are, if anything, becoming more sustainable.
“The financial system remains very resilient as it stands should a shock like rising unemployment come,” he said.
While global economic growth is slowing, Poloz also pointed to recent developments , such as an uptick in foreign direct investment into Canada and the ratification of the USMCA trade agreement edging closer, which should both strengthen the Canadian economy.
A focus ahead for Poloz, and his colleagues at the Bank of Canada, is the upcoming renewal of the country’s inflation targeting agreement, which is scheduled for 2021.
On this subject, Poloz said, “In this renewal cycle we are going back to basics, comparing alternative targeting frameworks—such as inflation-averaging strategies and nominal-GDP targeting—with inflation targeting.”