Low rates still needed, Bank of Canada senior deputy governor says


TORONTO - Canada’s struggling economy still needs the extra boost of monetary stimulus to help keep the recovery on track, says Bank of Canada senior deputy governor Carolyn Wilkins.

She said “persistent headwinds” could mean that “some degree of stimulus” will be needed to keep inflation on target, even after the economy returns to full capacity.

In her first speech as the senior deputy governor, Wilkins said potential output growth in Canada and other industrialized economies will be lower than it was in the years leading up to the financial crisis.

She added that the central bank estimates the neutral interest rate, where the economy operates at full capacity with stable inflation, is lower than before.

Wilkins said the Bank of Canada estimates that the rate for Canada stands at between three and four per cent, down from 4.5 to 5.5 per cent in the mid-2000s.

The Bank of Canada has kept its key interest rate at one per cent for four years.

Wilkins began a seven-year term in the senior deputy role in May.

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