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The central bank warned that some lower-income workers, who are more affected by unemployment or falling income, “will face long-term income losses” and push more families to the financial edge.
Although high-income families may have extra savings to spend at this stage, some families will give priority to repaying their debts because of the uncertain economic environment, the report said.
Discounts on unnecessary inventories and lower-than-planned price increases will also be a drag on inflation, which the central bank expects to remain weak and then gradually return to its 2 per cent target.
Activity in the housing market will also slow in the coming years due to the economic downturn and the decline in the number of immigrants, the report said.
The benchmark interest rate has remained low at 0.25 per cent since the central bank cut interest rates in response to the COVID-19 epidemic in March.
Tiff Macklem, the new governor of the central bank, has hinted that he will not cut interest rates further, nor will he raise interest rates until the economy fully recovers.
In its first speech last month, Macklem said the central bank expected economic growth in the third quarter of this year, but warned that the road to recovery would be long and not smooth.
According to Statistics Canada, the consumer price index fell 0.2% year-on-year in April and 0.5% in May, mainly because the blockade curbed consumer spending.