Lower global growth and interest rates are a challenge for central bankers around the world. Senior Deputy Governor Carolyn A. Wilkins explains that Canada is well-positioned to secure prosperity and avoid a long period of slow growth if we take the right steps.
Canada has avoided secular stagnation
Global growth and interest rates are lower than they used to be, in part because the population is aging and gains in productivity have slowed. But immigration and innovation have helped Canada avoid the kind of long period of slow growth and weak demand seen in Japan in recent decades.
Canada and other advanced economies will need to do more to support prosperity and avoid suffering from chronically slow growth and weak demand in the future.
The right monetary policy has helped
The Bank of Canada’s strong policy framework, which targets low, stable and predictable inflation, has helped support growth and employment. We are always thinking about ways to improve that framework, along with the tools we use to keep inflation close to 2 percent.
The work that we’re undertaking now to renew our inflation-control agreement and tool kit will only make that framework stronger for a world with low interest rates.
Further innovation and investment are key
We need to do more to support prosperity and avoid slow growth in the future. Boosting productivity with government policies that support investment and innovation will help. The private sector must be involved as well, particularly in areas like workplace skills training.
Building prosperity is up to us. The best policies to guard against stagnation and improve living standards are those that raise the trend line for growth.