Reflecting its best judgment, the Bank reduced its estimates of potential output growth in each of the years from 2009 to 2011. Nonetheless, we were relatively fortunate in Canada. In the immediate aftermath of the crisis, stimulative monetary and fiscal policies proved highly effective in maintaining domestic demand, particularly household expenditures.
Household spending was supported by strong growth in borrowing, which resulted in record-high debt-to-income levels. Given the circumstances, it was a good thing that households had the capacity to expand their spending – this provided a necessary cushion from the worst effects of the global contraction. The Bank has been careful to remind people that interest rates will rise at some point.