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Vaccines can cause a rapid economic recovery

From Ottawa, Ontario-Bank of Canada Governor Tiff McClem said the Canadian economy could recover faster than expected if consumer spending surged following a successful coronavirus vaccination.

Meanwhile, if the economy weakens in the second wave of infection, McClem pointed out that central banks could reduce already record low interest rates if necessary.

In late October, the bank said it assumed that the vaccine would not be widely available until mid-2022. Since then, several manufacturers have announced vaccines that could be distributed early next year.

In response to a question from the House of Commons’ Finance Committee, McClem said, “Especially with vaccines, households may decide to spend more than expected, which will help the economy recover faster.” It was. He said the news about the vaccine was promising.

In late October, banks predicted that the economy would not fully recover until sometime in 2023, and McClem reiterated in his opening remarks.

He said the road to recovery is still at risk. Earlier this year, banks cut key interest rates to 0.25%.

“Even if it doesn’t go negative, it could lower the effective lower bound. It’s 25 basis points. It could go a little lower,” McClem said, reiterating that negative interest rates are useless.

The Federal Reserve Board has a key rate target of 0 to 0.25%. This month the Reserve Bank of Australia cut its policy rate down to 0.1%.

Some other central banks, such as the European Central Bank and the Bank of England, also have benchmark rates of less than 0.25%.

“I want to be clear, Canadians can be confident that borrowing costs will remain at very low levels over the long term,” McClem said.

Vaccines can cause a rapid economic recovery

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