Bank of Canada Governor Stephen Poloz on Thursday said the world was in an era where interest rates were probably going to stay low and would not go back to where they were 20 or 30 years ago.
Poloz, speaking to financial journalists ahead of his June 3 retirement, also said he felt some of the talk about the damage that could be done by the coronavirus outbreak was “a little too dire” and predicted the bank’s best-case scenario for recovery was still possible.
The Bank of Canada – which targets 2% inflation – has slashed its key overnight interest rate three times to a record low 0.25% since the crisis started and markets do not expect another move before next year.
“We are in an era where interest rates are probably going to stay low, for demographic reasons and economic growth reasons. I don’t know how low really but they’re just not going to be like where they were 20 years ago or 30 years ago,” Poloz said. “So central banks will have less room to maneuver.”
Canada’s overall inflation rate turned negative in April and Poloz said “if it’s going to be underperforming then we’re going to be easier for longer. That’s the essence of the (2%) target and that’s why it’s there”.