Mark Carney reiterated once again Thursday that keeping interest rates near zero through June is the "appropriate" policy for the Bank of Canada.
The central-bank Governor's cautious approach speaks volumes, given that fourth-quarter economic growth was the fastest since 2000, the trade surplus grew in January as exports withstood the effects of the strong loonie, and the bank's preferred gauge of inflation hit Mr. Carney's target in January, more than a year before policy makers had forecast.
What it shows is how determined Mr. Carney is to avoid repeating mistakes made by previous central bankers, especially the U.S. Federal Reserve Board, whose hasty retreat from measures aimed at ending the Great Depression prolonged and worsened the malaise.
Cat:e528746c-3414-401a-b14b-50247e3bdf01Forum:2d13dc33-9921-4d4a-815f-e809277631e4
Mr. Carney made the comment about interest rates after a speech at Carleton University in Ottawa, where he spoke live via video conference to economics students across the country to mark the central bank's 75th birthday.
Contrasting the recent crisis with the downturn in the 1930s, Mr. Carney said the global economy was able to navigate the choppy waters this time around thanks to "aggressive and timely actions" of policy makers around the world.
The next few months will be the Bank of Canada's biggest test since.
And there's little to draw from recent history to guide it, as the Great Recession of 2008-09 bore little resemblance to downturns in the early 1980s and 1990s, which happened as the Bank of Canada tried in vain to quash inflation with double-digit interest rates.
"Those experiences offer nothing in terms of what's going to happen now," said Stephen Gordon, an economics professor at Laval University in Quebec City. "This is actually the first time we've had a real recession where the Bank of Canada wasn't already tightening."
As Mr. Carney gets ready to raise rates that have been frozen since last April, there aren't many clear lessons to be drawn from the last tightening campaign, from 2004 to 2007, either.
The benchmark rate was 2.25 per cent at the start of that stretch - about half as far from what most economists consider "neutral."
The closest analogies for the tricky balancing act policy makers in Canada and around the world face as they unwind their unprecedented emergency measures are the Great Depression, or Japan's largely unsuccessful battles with deflation in the 1990s.
With government stimulus spending set to run out next year, the pressure is on for Mr. Carney to hit the mark on the timing and the size of his moves, and hints to markets about both, so the recovery doesn't retrench. Economic slack in Canada looks to be evaporating more quickly than anticipated, but that's against the backdrop of questions about the staying power of the United States' turnaround, the ballooning U.S. debt load, and similar woes in Europe which, if mishandled, could fuel more trouble for banks.
There's an outside chance borrowing costs here could start rising as soon as next month, but few economists believe the benchmark rate will reach 2.25 per cent before next summer, meaning most mortgage holders, for instance, won't see increases on that scale until then. It also means there's less chance of choking off the recovery in sectors such as housing that have driven the rebound.
"You want to convince the market that it's not like other periods, so the minute you start to pull the punch bowl away, they don't price in a whole cycle's worth of rate hikes" and drive up short-term bond yields, said Derek Holt, an economist with Scotia Capital in Toronto.
Most economists say the central bank will lift rates in increments of no more than 0.25 of a percentage point and may stop after a few moves to re-evaluate. That's how the Reserve Bank of Australia has proceeded since last October, when it became the first major central bank to tighten as the dust started to settle on the crisis.
"I'm not convinced that pausing will be part of an explicit plan going into the tightening cycle, but it probably needs to be acknowledged as a possibility, should conditions ebb and flow," said Eric Lascelles, chief rates strategist with TD Securities in Toronto. "There is a great deal of fear of replicating the Japanese example, or the 1937 double-dip."
Even Scotia's Mr. Holt, who has said for weeks that Mr. Carney could start raising rates at its April 20 decision rather than wait until the end of a conditional pledge to stand pat through June, sees "non-emergency, but low" rates for years.
That shows economists are confident Mr. Carney has learned what little he can from history.