The “search for yield” could cause risk to be underpriced or lead investors to take on exposures that they may not be able to manage if conditions become less benign. Since December, there has been mounting evidence of this search-for-yield dynamic in the global financial system, although the risk that it could lead to financial instability in Canada remains moderate.
The bank recognises that further steps still remain to be undertaken, such as removal of structural bottlenecks that are retarding growth and diversification of the economy, e.g. reliable and adequate supply of energy. The Bank believes that the private sector is an engine of growth in any economy.