While Canada’s financial sector is healthy, the International Monetary Fund (IMF) says it’s essential to remain vigilant against the potential risks from the prolonged period of low interest rates.
“Pension funds and life insurance companies appear to have coped well with a prolonged period of low interest rates, although their increased reliance on non-traditional investment strategies continues to deserve close scrutiny from regulators,” its report states.
The IMF adds that continued expansion abroad of both Canadian banks and life insurance companies, while contributing to diversification, also calls for enhanced monitoring.
It expects the Canadian economy to grow by 2.25% in 2014—up from an estimated 1.6% this year—as a pickup in the U.S. recovery boosts exports.
The IMF also doesn’t expect the Bank of Canada to begin raising interest rates until 2015.