Bank of Canada governor Stephen Poloz is suggesting, for the first time, the central bank would consider pushing its trend-setting interest rate below zero if Canada ever suffers a major economic jolt like the financial crisis of 2008.
But he makes it clear that sort of drastic measure is by no means an indication the bank is going to travel down that road.
CKNW’s business analyst says negative interest rates walk a fine line between battling an economic slump and making it much worse.
Robert Levy says negative interest rates can spur economic growth, and encourage banks to lend money, but there is also a dark side.
“The idea of negative mortgage rates is scary in the sense that people have a lot of wealth in their homes and Canada and you don’t want to see any deflationary type scenario that would prompt housing to sell off.”
Levy says negative interest rates are a finicky tool.
“It’s a tool they may forced to use should the economy take a downturn going into 2016 or beyond.
He says markets didn’t budget much of the announcement from the Bank of Canada, signalling the markets don’t think negative rates are coming any time soon.