The Bank of Canada sees the Canadian economy facing a prolonged and uneven recuperation period with households remaining cautious with their spending until there is a coronavirus vaccine, Deputy Governor Lawrence Schembri said on Thursday.
Schembri, speaking to a business audience, said the central bank expects Canada’s economic recovery to be in two phases: a relatively quick reopening and then a longer recuperation, with the path varying greatly by region. He made no mention of future policy moves.
“The uncertainty around this recuperation stage is extraordinary and points toward a recovery that will be gradual and long-lasting as this uncertainty slowly dissipates,” Schembri said.
“Cautious spending behaviour on the part of households will likely continue until a vaccine becomes available.”
The Bank of Canada, which slashed its key interest rate three times in March to a record-low 0.25%, is prepared to act to support the financial system and underpin the recovery, the deputy governor reiterated.
Fiscal policy will also be needed to target the specific needs of vulnerable households, sectors and regions, Schembri said.
The speech followed a Tuesday appearance by new Bank of Canada Governor Tiff Macklem, who said the bank remains focused on using its policy tools, including low interest rates, to support the Canada’s economic recovery from COVID-19.
The Canadian dollar maintained its earlier decline, down 0.3% at 1.3610 to the greenback, or 73.48 U.S. cents. Money markets do not expect further rate moves this year. [BOCWATCH]