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There’s an estimated $200 billion in excess savings sitting on households’ balance sheets. Deploying those funds could accelerate the recovery, pushing the Bank of Canada to tighten monetary policy sooner than planned, says a new report from TD Economics.

According to the report, a combination of restricted spending opportunities and rising incomes — thanks to generous government supports and employment growth in higher-paying sectors — has Canadian households saving much more than usual.

Amid continued pandemic uncertainty and the slow progress of vaccine deployment, “a bias towards high savings and debt paydown” will likely continue in the near-term, the report said.

“However, the longevity of shutdowns can also create a stronger impulse from pent-up demand,” the report said. “This could spell a rapid increase in outlays, the likes of which has drawn parallels to the post World War 2 period.”

Yet, TD said that the Bank of Canada is currently expecting consumers to slowly normalize their savings and to not direct their accumulated savings toward added consumption.

“We consider this a highly conservative assumption,” the report said.

A faster return to normal savings rates and some spending of the accumulated savings could boost consumption growth above current expectations, “turbocharging Canada’s economic recovery,” the report said.

The rebound could also get a boost from further fiscal stimulus, which could have the economy back operating at its potential in early 2022 — sooner than expected.

Similarly, added stimulus in the U.S. could spillover to Canada, providing another accelerant.

If these upside risks materialize, the timing of rate hikes may be pushed forward too.

“The Bank will probably wait to see sustained signs of rising inflationary pressures before adjusting guidance. If evidence of a sturdier recovery starts building, expect shifts in tone to come sooner rather than later,” the report said.