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The Bank of Canada needs a plan for the next big recession -- and they should share it
In sum, powerful forces are working to keep the supply of savings high and the demand for funds to invest low. The net result has been and will continue to be low nominal and real (inflation-corrected) interest rates. So what happens the next time the Bank of Canada is called on to combat a big recession? Odds are that it won’t be able to use its traditional strategy of lowering interest rates by enough to deal with the problem. As a benchmark, the Bank cut its policy rate by 4.25 percentage points in response to the financial crisis. No one thinks the Bank could or should cut short-term interest rates from 1.75 ... (full story)