Canada’s nearly $300 billion in COVID relief helped the nation navigate the pandemic’s acute phase, and now in its second act is poised to provide a soft landing for the economy.

That’s the view from the chief executive officers of some of the country’s top banks who spoke at the Bank of Nova Scotia financials summit on Wednesday. 

The Bank of Canada’s interest-rate increases are cooling parts of the economy. Still, consumers and businesses have extra cash on their balance sheets, which should help reduce the hit, the executives said.

“You see that in consumer deposits, you see that in business deposits -- the stimulus of COVID relief is still in the system,” Canadian Imperial Bank of Commerce CEO Victor Dodig said at the conference. “That will take some time to run off.”

The Bank of Canada on Wednesday delivered its fourth straight outsize interest-rate hike and said that rates will need to rise further to drag inflation down from four-decade highs. The increase follows a surprise 100-basis-point hike in July and half-point raises in April and June, making the current tightening effort one of the most aggressive ever.


Royal Bank of Canada CEO Dave McKay said he’s not concerned about the rate increases setting off a sharp recession because of the extra cash on hand, as well as the country’s strong labor market.

“As we play those forward in different scenarios, we see that as a shock absorber to any hard landing and therefore a quicker recovery,” McKay said. “That’s how we get our head around that this should be shallow and shorter, and therefore we should bounce back more quickly.”

McKay gave the Bank of Canada’s actions so far a vote of confidence, saying they’re reducing growth in mortgage loans, slowing purchase activity on credit cards and cooling investment- and non-investment-grade credit markets.

“That’s what the Bank of Canada wants,” McKay said. “It wants a slowing of activity. It has to start to collapse demand to get inflation down. So all of those are positive signs.