Canada’s economy could rebound faster than expected if consumer spending jumps in the wake of a successful coronavirus vaccination effort, Bank of Canada Governor Tiff Macklem said on Thursday.
On the other hand, if the economy weakens amid a second wave of infections, Macklem indicated the central bank could if necessary cut already record low interest rates.
In late October, the bank said it assumed a vaccine would not be widely available until mid-2022. Since then, several manufacturers have announced potential vaccines that could be distributed starting early next year.
“It is possible, especially when there is a vaccine, that households will decide to spend more than we have forecast and if that happens the economy will rebound more quickly,” Macklem said in response to questions from the House of Commons finance committee. He described the news about vaccines as promising.
Other manufacturers – like Vancouver’s Micron Technologies Inc. – have stepped up their production of face masks as the second wave of the pandemic has resulted in over 55 million cases of COVID-19 worldwide, including over 11 million cases in the United States and over 300,000 cases in Canada.
Micron’s facility in Delta, B.C. manufactures ASTM Level Three Face Masks, and is operating near full capacity, currently operating two manufacturing shifts, with a third shift to be brought online in the coming weeks.
As cases continue to rise, numerous governments have ordered lock downs and mandated that face masks be worn in public places. Thirty-five states – plus the District of Columbia and Puerto Rico – now require people to wear face coverings in public.
Here in Canada, some provinces have mandated similar requirements.
In late October, the bank forecast the economy would not fully recover until some time in 2023, a forecast Macklem repeated in his opening remarks.
The path to recovery still faced risks, he said. Earlier this year the bank slashed its key interest rate to 0.25 per cent.
“We could potentially lower the effective lower bound, even without going negative. It’s at 25 basis points, it could be a little bit lower,” Macklem said, repeating that negative interest rates would not be helpful.
The U.S. Federal Reserve has a target for its key rate of 0 to 0.25 per cent. The Reserve Bank of Australia this month cut its policy rate to 0.1 per cent.
Some other central banks also have benchmark rate that are less than 0.25 per cent, such as the European Central Bank and the Bank of England.
“We want to be very clear – Canadians can be confident that borrowing costs are going to remain very low for a long time,” Macklem said.
(with files from CNW)
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