Higher for longer — and maybe forever: Bank of Canada deputy says ultra-low rates may not return

financialpost.com:

Bank of Canada senior deputy governor Carolyn Rogers laid out the central bank’s view of the interest rate path going forward at an event in Vancouver Nov. 9 and indebted Canadians may not like what she had to say. The Financial Post’s Ian Vandaelle breaks down four key takeaways from Rogers’ speech.

In her prepared remarks, Rogers said that Canadians expecting a return to the ultra-low rate environment of the last decade and a half may be sorely disappointed, noting the rock-bottom rate environment in the wake of the Great Financial Crisis was an outlier, not the rule.

That means Canadians hoping to wait out the storm may be waiting a long time — if it happens at all.

“People buying homes or renewing their mortgages these days are facing the highest borrowing costs they’ve experienced in a long time or — in many cases — ever,” she said.

“It can be tempting to think those very low rates will eventually return. But there are reasons to think that may not happen.”

While the Bank of Canada does exert control over its benchmark rate, Rogers noted there are a bevy of factors outside the bank’s control that feed into inflation. Geopolitical risks, including the war in Ukraine and the increasingly bifurcated global trade order both have the potential to continue to raise the price of goods, for example.

Another structural issue at play is the wave of Baby Boomers retiring — not only does that remove a substantial amount of labour capacity from the system, retirees tend to shift from saving to spending, adding demand into the economy. Rogers said while the outcomes do remain to be determined, the risks are tilted toward higher inflation in the long term.

“All this obviously involves a lot of uncertainty. But it’s not hard to see