RBC’s CEO Cautions Trudeau Against Overspending in New Budget

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Royal Bank of Canada Chief Executive Officer David McKay cautioned the Canadian government against overspending in this year’s budget, saying that previous stimulus programs already have the economy primed for a strong recovery.

Prime Minister Justin Trudeau has said he has voters’ support to release an ambitious, debt-financed recovery plan. Finance Minister Chrystia Freeland is scheduled to unveil the budget, the government’s first full spending plan in two years, on April 19.

McKay said the government’s Covid-19 support programs have resulted in an extra C$180 billion ($143 billion) in cash in consumers’ accounts that, along with low interest rates and corporate cash holdings, already have the economy poised for a rebound. The government should instead take a “read-and-react” approach to further stimulus, he said.

“I would counsel that we don’t want to overdo this,” McKay said in response to reporters’ questions after the company’s annual meeting. “Why not keep our powder dry and see how we recover, knowing that we’ve got this dry powder to interject quickly -- as we’ve shown we can do in the past year -- if things aren’t playing out the way we hoped.” The CEO didn’t mention Trudeau by name.

Already, the growth that’s likely to occur could spark enough inflation to prompt central bankers to boost short-term rates in late 2022, McKay said.

©2021 Bloomberg L.P.

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