Kevin Carmichael: Facing the most brutal recession ever, the central bank has already done almost everything it can
Stephen Poloz concluded the public portion of his tenure as Bank of Canada governor on May 28 with a visit to the Senate finance committee, where he told senators he was confident the central bank’s response to the COVID-19 crisis was working, but that policy-makers could do more if required.In an uncanny bit of synchronicity, Poloz’s last day on the job was spent overseeing the completion of the Bank of Canada’s latest round of interest rate deliberations.
That’s not how generals talk when they are preparing to return to the battlefield. More could be needed eventually, but with markets stable, there is little else the Bank of Canada can do at this stage. Statistics Canada last week reported that Canada’s gross domestic product shrunk at an annual rate of 8.2 per cent in the first quarter as the lockdowns took hold. The collapse accelerated into the current quarter, probably to an annual rate of about 40 per cent, according to Royal Bank of Canada’s economics unit. We’re experiencing the most brutal recession ever.
With policy essentially set for now, the central bank might instead try countering excessive negativity by pushing back against a broad embrace of the most dire scenarios of the future.
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