RBC CEO Sees Canada’s $225 Billion Cash Buffer Aiding Recovery

(Bloomberg) — Royal Bank of Canada Chief Executive Officer Dave McKay said the extra cash that the country’s consumers and businesses have saved up may make the expected economic downturn mercifully short.

(Bloomberg) — Royal Bank of Canada Chief Executive Officer Dave McKay said the extra cash that the country’s consumers and businesses have saved up may make the expected economic downturn mercifully short.

Canada’s liquidity has ballooned to about C$300 billion ($225 billion), up from the roughly C$40 billion that consumers and businesses each had on hand before the pandemic, McKay said in an interview with BNN Bloomberg Television. While McKay’s Toronto-based bank expects the country to enter a recession this year, that liquidity buffer — which he estimates is about 20% of gross domestic product — will help limit the damage, he said.

“When you think about that latent spending power, it’s very significant stimulus for a recovery,” McKay said.

The speed of the recovery also will depend on how long interest rates stay at their elevated levels, he said. The Bank of Canada will raise rates one more time and hold them there to see how effective its hiking campaign has been in tamping down inflation, McKay said, echoing most economists’ projections.

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