Deputy Prime Minister and Finance Minister Chrystia Freeland says the Canadian government is well aware of inflationary fears and as such, is committed to rein in federal spending.

“Our budget, which I tabled in April, was a very fiscally-responsible budget. In fact, the rate of fiscal consolidation in Canada, the speed at which our deficits and debt are coming down, is tied for first place in the G7,” said Freeland.

The finance minister was speaking alongside U.S. Treasury Secretary Janet Yellen during a Toronto visit on Monday, where the two touted their countries’ strong economic ties.

Her comments come as one of Canada’s largest commercial banks argues that the Bank of Canada can’t be the only entity fighting inflation through interest rate hikes and that lower government consumption would take some of the “burden of adjustment” away from the private sector.

“In Canada, as elsewhere, the Bank of Canada is fighting the lagged and ongoing impact of fiscal support measures along with a range of other inflation drivers. Given this, the output losses that the Bank of Canada must engineer to rein in inflation are falling disproportionately on the private sector,” a report by Scotiabank chief economist Jean-Francois Perrault and director, modelling and forecasting Réne Lalonde reads.

It goes on to state that high levels of fiscal spending will necessitate an “unnecessarily large” crowding out of private spending.

“Less government consumption would lead to a lower path for the policy rate and take some of the burden of adjustment away from the private sector,” it states.

Freeland said Ottawa’s commitment to fiscal tightening was exemplified last week during her speech on inflation, when the government could have introduced new spending measures but instead stuck with an affordability theme.

The U.S. too is not immune to the soaring cost of living.

Yellen on Monday said a gas tax holiday is one measure worth considering to help ease every day costs for families.

“Consumers are really hurting from higher gas prices. It’s been a substantial burden on American households. And I think, while not perfect, it is something that should be under consideration as a policy to address it,” she said.

The Conservative Party of Canada has long called on the government to weigh a similar move but Freeland said the situation is different in Canada.

“Our price on pollution does include an element where we return the money to Canadian families and the amount returned to Canadian families has gone up this year,” she said.

However, the finance minister specified that Ottawa isn’t shutting doors to measures that could help bring down living costs in the future.

Asked on CTV News Channel’s Power Play whether this kind of policy would cool inflation, Perrault said while it would have a temporary impact, it would meet its intended objective.

“It’s not what we consider kind of core inflation. Typically when we think about trend inflation we take out those elements that are most volatile and gasoline is one of those. But certainly if you’re helping deal with higher inflation one what to do that is to reduce gas taxes,” he said on Monday.

Perrault said while he agrees with the Canadian government there is a global component to inflation, there are internal forces at play, such as high rent and home prices and low working wages, that can be tackled, partially, through fiscal policy.

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