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The Bank of Canada will hold interest rates at 0.25% until the economy fully rebounds from the pandemic, a goal that can't be reached without drawing in workers from marginalized groups, Governor Tiff Macklem said Thursday.
"We are in the sharpest and most unequal economic cycle in our lifetime," Macklem said in the text of a speech to university students. "The Bank has pledged to support Canadian households and businesses through the full length of the recovery by holding our policy rate at its effective lower bound until the spare capacity in the economy is used up, so that we sustainably achieve our 2% inflation target."
Covid-19 shutdowns have widened divisions between some close-contact industries where output is 20% below normal and other industries where production has exceeded levels reached before the pandemic, Macklem said. That pattern that has further disadvantaged women, youth and racial minorities, he said.
"We won't fully heal the economy until we address these unequal impacts," Macklem said of the divisions created by the downturn. He also said the job recovery must go beyond restoring the positions canceled by the recession to ensuring future gains.
"That needs to include the workers most affected by this pandemic: low-wage earners, women, youth and racialized Canadians. It means that we've not only recovered the jobs lost due to the pandemic, but we have also created jobs for graduating students and others who have entered the job market since the start of the pandemic," he said.
The Bank is studying whether its moves to boost the economy and job creation with quantitative easing may contribute to wider disparities in wealth. The BOC is also looking at wider social impacts during its review of the 2% inflation target, which is up for renewal later this year. His remarks didn't break new ground on signs that inflation in the U.S. and Canada is surging, or on recent strength in the Canadian dollar.
Macklem acknowledged the BOC's shortcomings building diversity in its own ranks-- MNI has reported the BOC is still seeking a new Senior Deputy Governor five months after the only female member of the top the Governing Council left. "I'm not going to pretend that we've done enough. We are still far from representative, particularly at the most senior levels of the Bank," Macklem said.
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