The Globe and Mail reports in its Friday edition that the Bank of Canada is keeping an eye on a rare reversal of short and long-term interest rates.
The Globe's Barrie McKenna writes that
the pattern has been a harbinger of recessions in the past. BOC senior deputy governor Carolyn Wilkins said in a speech Thursday, "When yield curves flatten and they invert, we need to pay attention." Governor Stephen Poloz said after her speech: "Historically, that has been one signal among others that, if nothing else, growth will be slower. And if it inverts quite a bit and is there for a long time, maybe it could signal a recession." Ms. Wilkins cautioned that with interest rates lower around the world, these kinds of yield inversions may become more frequent.
Ms. Wilkins said she and the five other members of the bank's governing council spent "some time talking about prices in financial markets" as they prepared for this week's interest-rate decision. On Wednesday, the Bank of Canada held its key rate steady at 1.75 per cent.
Ms. Wilkins said there are other relatively innocent reasons for the inversion of the yield curve, including a move by many of the world's central banks to abruptly halt recent rate hikes.
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