MONTREAL, June 13, 2016 /CNW Telbec/ - Low interest rates and weak growth are here to stay at least in the near-term, and the world must adapt, according to a group of leading economists at the kick-off session of today's International Pension Conference of Montréal (IPCM).
During the session, entitled Macroeconomic Outlook on Interest Rates: How Do We Adjust our Expectations in the "New Normal?" panellists addressed the impact of central banks' monetary policies and interest rate cycle. Session moderator Clément Gignac, Senior Vice President and Chief Economist at Industrial Alliance began the session by explaining that, "The world has changed. Central banks have used traditional monetary policy tools close to their limit. As of now, nearly $8 trillion of government debt carries negative interest rates, which is a real challenge for asset managers and pension funds. We need to think of a new approach to tackle these challenges."
Panellist Marc Lévesque, Vice President, Economics and Market Strategy at PSP Investments, stated that investors must be prepared for conditions characterized by slow growth. "Economic growth will continue to be slower than in the past, mainly because of demographic trends. Though rates will not remain unusually low forever, long-term equilibrium rates are lower and the 'normalization' of rates won't happen overnight," he said.
Peter Berezin, Chief Strategist, Global Investment Strategy at BCA Research, said that the seeds of deflation being sewn now will lead to inflation starting in the 2020s: "The same forces that contribute to deflation today will contribute to inflation tomorrow. For example, though austerity has been the name of the game in recent years, governments will start loosening the purse strings, bringing us from a deflationary world to an inflationary one. Everything central banks have done over the last 70 years sounded implausible," said Mr. Berezin. "Before they did it."
Jesper Koll, Chief Executive Officer of WidomTree Japan, echoed Mr. Gignac using the Japanese economy as an example. "The case of Japan shows that printing money alone does not work. It must be linked with fiscal policy in order to produce the expected outcome of increasing GDP," said Mr. Koll. "Although its demographics will continue to decline, we think Japan will see the rise of a new middle class. This will be due to an increase in full-time employment, increased access to credit and a more active female workforce. Now would be a good time to be reborn as a 23-year old Japanese."
The International Pension Conference of Montréal will continue on Monday, June 13 with sessions at 10:30am and 3:00pm. Taking place at Montreal's Hotel Bonaventure under the auspices of the Conference of Montréal, the IPCM advances the debate on pension issues and solutions around the world. It is a unique opportunity for policy makers, political advisers, financial experts, actuaries and pension plan administrators to meet and exchanges ideas. To view the IPCM program, please click here.
About the International Economic Forum of the Americas
The Conference of Montreal, organized by the International Economic Forum of the Americas, is a major international event which invites leaders from the worlds of economics, politics and academia, the public and private sectors, and civil society to come and discuss the major issues surrounding economic globalization, with a particular emphasis on relations between the Americas and the other continents.
SOURCE Finances Montréal
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