Bank of Canada Governor Stephen Poloz is known for speaking in metaphors. He has used hockey cards to explain the wealth effects of spikes in energy prices, and simmering spaghetti sauce to describe the response of central banks to the financial crisis. His best one, he says, is an image he constructed recently to counter the notion that ultra-low interest rates are doing nothing for the economy. “The idea that policy has stopped working, I think, is a bit odd,” Poloz said over the weekend. “My metaphor of riding a bike up a hill is probably one of the best ones I have ever had. Everybody understands that if you are riding a bike up a hill and you stop pedaling, you are going to notice the outcome right there. You probably are just going to fall over.”
Unfortunately, the Canadian economy is a long way from being ready for the Tour de France. Poloz and the other members of the Bank of Canada’s Governing Council dropped the benchmark lending rate to 0.5 percent in July 2015, matching the lowest level on record. The results have been disappointing. The International Monetary Fund predicted last week that Canada’s gross domestic product will expand only 1.2 percent in 2016, one of the weaker rates of growth among the world’s richer economies. That’s partly because of the collapse in oil prices, and partly because non-energy exports have been unresponsive to the rocket fuel of cheap money and a weaker exchange rate.
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