Evidence of meeting #7 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
Governor, Bank of Canada
I'm going to give this last question, if possible, to Senior Deputy Governor Wilkins and give her the opportunity to have the last word.
Liberal
The Chair Liberal Wayne Easter
Okay, if you folks don't mind staying a little longer, we'll do that. Then we'll go to Mr. McLeod.
Governor, Bank of Canada
Well, why don't you let Mr. McLeod ask his question? Then we'll go to the deputy governor.
Liberal
The Chair Liberal Wayne Easter
All right. We'll sort it out; there's no problem.
Mr. McLeod, go ahead.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair.
I want to ask a question regarding something that was asked earlier about the cost of borrowing if the interest rate went up by 1%. I want to know what kind of conditions we would need to see before considering a 1% increase in interest rates.
You mentioned earlier that the Bank doesn't finance governments but affects the cost of borrowing, so I'd like to ask that question.
Governor, Bank of Canada
I think that's a perfect final question.
We can get our last bit of policy advice at this committee from Senior Deputy Governor Wilkins.
Senior Deputy Governor, Bank of Canada
We've said publicly that we commit to keeping interest rates where they are, which is low, until the output gaps and the economy are operating at full capacity. According to our forecast, that's not soon; that's somewhere in 2023. To get an increase after that of 1% or more is a function of how well the economy is doing.
If we're in a situation where we can raise interest rates back to a more neutral level, which we now think is about two and a quarter per cent, that's very good news for Canadians, and it's very good news for businesses and households. That's point number one.
In terms of those costs, when you talk about raising interest rates, we raise the short-term interest rate but the markets decide what longer-term interest rates are going to be. This includes rates that are faced by businesses, households and governments. The ultimate impact on borrowers depends on what happens to that interest rate curve. You can do calculations but they're all going to be hypothetical until it actually happens.
We're not trying to be coy by not giving specific numbers; we're trying to be realistic about what we can know for sure.
Back to your question, when interest rates start to rise it's going to be because the Canadian economy is on a solid footing.
I would like to say one last word.
The last six and a half years as senior deputy governor have been an honour. You show a lot of respect for the Bank of Canada and a lot of confidence in me. I'd like to thank you for that. I'm really proud of what the bank has accomplished with the team, and I know going forward that it is in excellent hands with Tiff Macklem and the whole team.
Liberal
The Chair Liberal Wayne Easter
Thank you.
Ms. Wilkins, you've given us lots of reason to show confidence in you. That's the bottom line.
I do want to thank both of you for your appearance here today.
Conservative
Conservative
Pierre Poilievre Conservative Carleton, ON
I think you'll find unanimous consent for the committee to thank the senior deputy governor for her many years of service to Canada and for her hard work.
We wish her well in all her future endeavours.
Liberal
The Chair Liberal Wayne Easter
I don't see any objection to that point of order.
Not from you, Gabriel?
Mr. Ste-Marie said he just wanted to say the same thing in French.
I think that's a good note to end on.
Thank you, both, for your appearance.
I do know that at the Bank of Canada, certainly during the early times of this pandemic, every single one of the staff within the bank would be working long hours trying to figure out solutions.
Please pass our thanks to them as well.
Again, thank you very much for your appearance.
Steering committee members, we will reconvene in a few moments. You'll have to sign out and then sign back in.
This meeting is adjourned.