Demographics to weigh on economic growth and interest rates

In his speech last week, Bank of Canada Governor Stephen Poloz argued that the legacy of the financial crisis and demographic changes can explain Canada's recent lacklustre economic performance. More importantly, the latter also implies that future trend economic growth and equilibrium interest rates might be lower than in the past. Although markets interpreted his speech as somewhat dovish, there hasn't been any material change in the Bank's near-term outlook for GDP growth or inflation. The Bank is still firmly in neutral as far as the potential direction of the next move in interest rates is concerned.