The Globe and Mail reports in its Friday edition that Bank of Canada deputy governor Lawrence Schembri says pent-up household savings could offer much stimulus if people start spending, but warns it is not a sure thing. The Globe's Mark Rendell writes that
Canadians amassed a huge amount of additional savings last year, but the BOC expects only a portion of this to be spent moving forward, tempering expectations for a consumer-driven recovery.
Household savings increased by $180-billion last year, or about $5,800 a person, as many Canadians spent less and pocketed generous support cheques from Ottawa. These "forced" or "precautionary" savings could provide considerable preloaded stimulus for the economy if people turn on the spending taps later this year, Mr. Schembri said in a speech on Thursday.
Most of the additional savings last year were the result of spending less on services such as hospitality, transportation and tourism. It is unclear how much extra household savings can realistically be spent on meals, vacations and haircuts once COVID-19 immunization becomes widespread.
Mr. Schembri's speech came a day after the BOC decided to leave its benchmark interest rate at 0.25 per cent.
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