On October 23 Carney will announce the latest outlook for inflation, economic growth, and as a result the direction central interest rates will move. All indicators suggest that Carney will leave the rate untouched at 1 percent as the global economy continues to get murkier threatening Canada’s growth and leaving Canadians vulnerable to another economic crisis. At his speech in Nanaimo Carney, the lone G8 Governor talking of raising rates said he will give Canadians plenty of time to prepare for the adjustment which as of now is “a hypothetical question.”
“While we obviously cannot determine events over which we have no control, we can be transparent about what we expect and how we would react to different scenarios.”
Carney specifically mentioned the overburdened household debt levels in Canada as the top domestic issue threatening stability and that as he notices indicators suggesting inflation is nearing the two percent level he uses to justify a higher rate; he will announce his plans with plenty of forewarning.
Carney is reacting to the slowing growth out of China, the continuing struggles in the U.S, and the all but declared recession in Europe dropping the value of Canadian exports. He says the country must improve its domestic economic strengths to remain stable in the ever unstable world. This includes boosting consumer confidence as Carney has reiterated time and again consumer spending will be a large driver of economic growth.
“We can continue to invest in our greatest resource — our people.”
With the release of new statistics suggesting Canadians are in far more debt than anyone realized, backing off on the rate increase is definitely a good move from Carney. People won’t continue to spend while being told to get debts in line especially if the interest on those debts is heading up.
Canada is still in for a long road to recovery but as Carney himself says Canada “showed itself to be among the most resilient in the world through crisis.”