The Bank of Canada’s new governor predicts a bounce-back but warns of setbacks
By Erika Morris
The new governor of the Bank of Canada has warned that the Canadian economy is in for a rough ride. In his first speech since taking the job, Tiff Macklem said the country will see a “prolonged and bumpy” economic recovery from the pandemic’s blow.
Though the central bank predicts a boost in spending when restrictions ease and people go back to work and some normal activities, the bounce-back won’t last. Because things are reopening unevenly across provinces and industries and consumers face financial uncertainty, Macklem said supply and demand will likely see lasting damage.
Additionally, physical distancing rules will change how productive workplaces can be with many services unable to deliver. And, even with pent-up spending boosts, not everyone’s job will come back.
What happens next will depend in part on the federal government. While the central bank takes care of inflation, which has been negative for two months, the government is responsible for job creation, confidence, and investment.
The federal government is offering $14 billion to provinces to buy personal protective equipment, pay for sick leave, increase testing and tracing, and build up child-care options to encourage businesses. Provincial premiers need to sign on. The feds are also extending the wage subsidy program.
The Bank of Canada has also created a purchasing program of bonds and government debt to help make borrowing less expensive for both businesses and households.