A senior official at the Bank of Canada says the central bank will be paying close attention to what the post-pandemic economy can supply and what consumers demand.
Deputy governor Toni Gravelle said Thursday it’s possible that supply could recover faster than demand if businesses reopen quickly while consumers remain cautious.
In a speech by video conference to the Greater Sudbury Chamber of Commerce, he said it will be key for the bank’s governing council to understand how the pandemic has affected demand, employment and the economy’s capacity to produce goods and services by its next interest rate decision in mid-July.
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At that time, the bank will also release an updated economic outlook.
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The Bank of Canada held its key policy rate at 0.25 per cent on Wednesday, but said the economy appears to have avoided a worst-case scenario due to the COVID-19 pandemic.
Gravelle made clear that’s as low as the bank believes the rate can go before it causes problems in markets, a nod toward talk about negative interest rates to spur spending.
The bank also reduced some of its market operations after it “cranked up the volume to 11” to allow the banking system to tap directly into much-needed funding liquidity,