Bank of Canada makes wise decision

The decision of the Bank of Canada not to raise interest rates after the series of interest rate rises over the past   year and a half is a wise decision. The signs of slow down are percolating through the Canadian economy as the high dollar and relatively high interest rates are beginning to slow down the consumer driven boom that has had part of its fuel provided by the boom in real estate and the liquidity that has provided through lines of credit based on home equity.
As the real estate market slows so too will boom optimism dry up. Further rate increases by the Bank would simply drive the nail into the coffin of expectations more deeply. After all unemployment is still above 6 % when a more acceptable target would be 5 % or even 4 %.

Contemplate for a moment what a national unemployment rate of 4 % would look like in Canada after all these years of elevated unemployment. Think of the spur a rate like this would give to the ease with which an entire generation of young people who have had to struggle with high tuition fees, overworked and over stressed hours in the service industries, premature burn out and underemployment could begin their careers.

Imagine the great boost to government tax revenues such a low rate of unemployment would yield and the benefits that could flow to much needed investments in health care, education and infrastructure.

Consider the impact of such a low rate upon the poor and those currently marginally attached to the labour force.

For all of these reasons David Dodge has done the right thing . Now once it becomes clearer that further easing of the rates is plausible lets hope that he acts with reduced unemployment as his target. The days of inflation outside of energy and administered price increase through increased government taxation are behind us. The Schumpeterian boom is our new environment. Lets take maximum advantage and spread prosperity throughout the land.