Precise Investors

Sunday, January 23, 2022
Latest News

Higher interest rates good for global economy: Former Bank of Canada governor

Former Bank of Canada governor David Dodge says the world economy might be better off if policy-makers bumped interest rates a little bit higher.

He says boosting borrowing costs would help promote price and financial stability under current global conditions, which include historically low interest rates and stagnant growth. He says rate increases shouldn’t hurt employment and growth if combined with more government spending. He, however, acknowledges that extra spending would be a “big if” with many leaders reluctant to expand public investments.

His speech to members of the C.D. Howe Institute think tank in Toronto comes less than a week before a scheduled rate announcement by Bank of Canada governor Stephen Poloz. Dodge, who served as central bank governor from 2001 to 2008 and is currently the think tank’s national chairman, says “ultra-low” rates have left little room for policy-makers to help cushion the blow of any future downturn.

The Bank of Canada’s trend-setting rate sits at a paltry 0.5 per cent. Experts widely expect Poloz to leave the rate untouched, for now.

“At the present time, both price and financial stability would be better served by somewhat higher policy interest rates,” Dodge says in his speech.

“The capacity of policy to deal with a major negative shock going forward is extremely limited.”

There is also increasing concern that rock-bottom rates may actually be holding back growth, he adds: some workers may feel they need to save more for their retirement, thereby slowing consumption.

Low rates are also widening inequality of income and wealth within many advanced economies, Dodge added


The articles are for information purposes only and Precise Investors shall not be held responsible for any errors, omissions or inaccuracies within it. Any rules or regulations mentioned within the website are those relevant at the time of publication and may not be the most up-to-date.

Precise Investors does not endorse any of the products or services that appear on it or are linked to it and are not liable for any action that you may take as a result of the content of this website, or losses or damage you may incur doing so.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Please remember that investments of any type may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

Leave a Reply