OTTAWA — Low interest rates and slow economic growth will likely persist as the world grapples with structural factors such as a demographic slowdown and sluggish productivity, Bank of Canada Governor Stephen Poloz said on Thursday.
Speaking to a business audience in Toronto, Poloz stressed he was not making a near-term prediction about the Canadian central bank’s interest rate policy. The bank has kept rates unchanged since October 2018.
The governor, who announced last Friday he would retire in June, said global economic growth since the 2008 crisis had been disappointing. Population growth was slowing while trade conflicts were hitting productivity, he added.
“On balance, then, it looks like the global economy is set for continued slow economic growth for mostly structural reasons,” Poloz said. “For these same reasons, this means that low interest rates are likely to persist too.”
The Bank of Canada has left rates unchanged even as several of its counterparts – including the U.S. Federal Reserve – have eased. The bank says future moves will depend on its assessment of the damage done by trade conflicts against sources of economic resiliency.
Poloz also said there was a chance inflation could unexpectedly jump, fueled by a combination of high household and government debt as well as populist politics in some nations.
Did You See This CB Softwares?
37 SOFTWARE TOOLS... FOR $27!?Join Affiliate Bots Right Away
“Perhaps the recent tendency for inflation to run below target in many countries has fostered a degree of complacency,” he said.
Poloz said one possible consequence of persistently low rates was that household indebtedness – which he said was Canada’s most important financial vulnerability – could continue to increase relative to the overall economy.
He reiterated that Canada’s economy is operating close to capacity, inflation is on target, labour force participation is up across almost all age groups and the jobless rate is near historic lows.
© Thomson Reuters 2019