Former Bank of Canada governor David Dodge says the world economy might be better off if policy-makers bumped interest rates a little bit higher.
In prepared remarks for a speech at the CD Howe Institute in Toronto today, Dodge says boosting borrowing costs would help promote price and financial stability under current global conditions, which include historically low interest rates and stagnant growth.
He says rate increases shouldn’t hurt employment and growth if combined with more government spending.
He acknowledges, however, that extra spending would be a “big if” with many leaders reluctant to expand public investments. Dodge’s comments come less than a week before a scheduled rate announcement by Bank of Canada governor Stephen Poloz. Experts widely expect Poloz to leave the historically low rate of 0.5 percent untouched, for now.
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