Economy stronger, but rates remain

OTTAWA — Even with a burst of growth across 70 per cent of the country’s industries, the Bank of Canada’s second in command is hinting the bank is not quite ready to hike its key interest rate.

In a speech Monday, senior deputy governor Carolyn Wilkins said the broad-based surge is something Canada hasn’t seen since before the oil-price collapse nearly three years ago.

However, Wilkins made sure to underscore several lingering uncertainties as reasons the central bank might continue to hold off moving the rate, which has been locked at the very low level of 0.5 per cent for the past two years.

She pointed to unknowns surrounding U.S. economic policy, Canada’s recent below-target inflation readings as well as employment weaknesses in wage growth and the number of hours worked.

“If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly,” Wilkins said in prepared remarks of a speech to be delivered at the Asper School of Business in Winnipeg.

“You do not want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead.”

The bank’s next scheduled rate decision is set for July 12.

Wilkins credited strength in consumer spending, the services sector and the housing markets for helping carry Canada over the past few years.

She said Canada is now seeing an expansion of business investment, particularly in the energy sector, and “broadening” economic activity across the provinces as reasons for optimism.

The economy’s strength also comes from a number of sources, she added.

“What is encouraging is that this growth is not being driven by just a few key industries,” Wilkins said.

“The data show that more than 70 per cent of industries have been expanding — a rate we have not seen since the oil-price shock. That is the kind of diversity that helps support strong and sustained overall growth.”

Following months of improving economic indicators, a growing number of analysts have been saying it’s increasingly difficult for the bank to find reasons to hold back from raising its trendsetting rate.