Canada’s stagnating economy could force its central bank to deploy the type of extraordinary stimulus adopted in the U.S., Europe and Japan, according to BlackRock Inc., the world’s biggest money manager.
With a commodity prices collapse that probably sent the country into recession in the first half showing no signs of letting up, the Bank of Canada may need to follow its developed-nation peers with quantitative easing, according to Aubrey Basdeo, BlackRock’s head of Canadian fixed-income.
The Bank of Canada has already cut its benchmark interest rate twice this year to turn around the worst economic streak since the country’s last recession. With an overnight rate now at 0.5 percent, it’s nearing the point where other central banks decided to begin bond buying programs to force rates lower still and help companies borrow more cheaply.
“Corporations are screaming, ’I borrow out the curve, I don’t borrow in the overnight market, and my cost of funds have gone up even though you’re lowering rates,’” Basdeo said in an Aug. 10 phone interview from Toronto. “So you have to go into unconventional monetary policy.”
