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Opinion: Bank of Canada's new mandate comes with one wrinkle: politics – The Globe and Mail

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Minister of Finance Chrystia Freeland, left, and Governor of the Bank of Canada Tiff Macklem arrives for a joint news conference in Ottawa, on Dec. 13, 2021.Justin Tang/The Canadian Press

The renewal of the Bank of Canada’s mandate agreement with the federal government grants the central bank a five-year licence to, largely, continue doing what it has already been doing.

Still, the pact, and the unusual process that led to it, add some new wrinkles to Canadian monetary policy that could take years to iron out. What is normally a dull, technical process has transformed into a political event – and that could have some hard-to-predict ramifications.

After years of research and consultations by the central bank, and months of back and forth with the Finance department, the two unveiled a deal on Monday that left the bank’s core mandate unchanged. It will continue to use monetary policy – chiefly, interest rates – to pursue an inflation target of 2 per cent, the midpoint of a 1-per-cent-to-3-per-cent range of tolerance.

At the same time, Finance Minister Chrystia Freeland and Bank of Canada governor Tiff Macklem took a modest but meaningful step to incorporate another priority – “maximum sustainable employment” – into the bank’s job description, while emphasizing that “the primary objective of monetary policy is to maintain low, stable inflation over time.”

Usually, these five-year mandate reviews are a snoozefest – conducted quietly, behind closed doors, and ending with a joint statement that more or less rubber-stamps the status quo. The inflation target hasn’t changed in three decades.

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This renewal was different. The bank made its own preparations much more thorough and public, and openly discussed options for altering its mandate. The coincidence of a once-in-a-generation inflation surge hitting at the moment the government was tasked with approving a new mandate turned the discussion into an increasingly hot political topic in the weeks leading up to the final agreement.

Monday’s announcement was not merely the usual release of a joint statement and some accompanying documents, but rather a joint media conference with the Finance Minister and governor – a rare event that spoke to the high profile that this renewal had reached. The end result – with its substantial focus on inclusive employment goals – has unmistakable echoes of the current government’s own priorities.

It’s well short of the “dual mandate” the Federal Reserve has long held, under which the U.S. central bank is formally tasked with pursuing both 2-per-cent inflation and “maximum employment,” with the two goals carrying essentially equal weight. It’s clear in the wording of this new agreement that when push comes to shove, the inflation target remains the Bank of Canada’s No. 1 priority.

That said, it does put the bank’s marching orders on a similar path, if not as far along it. There now is a second, clearly annunciated priority, placed above all others, save inflation.

One of the big attractions of inflation targeting, which was adopted not just by Canada but by many other major economies in the 1990s, has been that it has given central banks a single, clear and (it turned out) achievable goal for monetary policy. It worked – in a way that previous monetary-policy mandates, which targeted any of a number of sometimes-competing economic objectives, had failed.

On the other hand, critics have argued that the inflation focus has given central banks too narrow a view, that their singular pursuit has too often been to the detriment of other objectives that are, arguably, more important than price stability – for instance, whether there are enough jobs for everyone who wants one.

But over the years, the Bank of Canada found that the pursuit of the inflation target actually gave it enough flexibility to achieve other virtuous outcomes by keeping its eyes on the inflation prize. In practice, the inflation target isn’t just about maintaining low and stable prices to foster predictability and confidence among businesses and consumers (as the bank often says). Rather, the bank uses inflation as a proxy for gauging when the economy is approaching its full capacity – which includes the notion of full employment.

So, effectively, the Bank of Canada already pursues maximum sustainable employment when it applies interest rates – it just uses the associated rise in inflationary pressures, via wage inflation, as its handy tool to know when the economy is getting there. The new language in the five-year mandate will do little, if anything, to alter that approach.

Over the longer run, though, the entrenchment of employment commitments could complicate the bank’s inflation pursuit. Inflation and employment are, typically, opposing forces; the lower the unemployment rate sinks, the more inflation rises, because wages tend to increase more as the supply of available labour shrinks. Raising rates to fight rising inflation risks slowing the economy before you’ve squeezed maximum employment out of it. Under this new mandate, that may be a consideration that future central bankers feel obliged to give more weight.

But what may be of bigger concern is the degree to which politics wormed its way into this mandate renewal. One of the enduring strengths of Canadian monetary policy has been its well-protected independence from political interference. This process – while a once-in-a-half-decade event – has shown a new willingness for political leaders, both in the government and in opposition, to breach that wall.

Will a future government, five or 10 years from now, decide to reverse these changes and remove the employment pledges from the document? Will another government push to add its own priorities to the bank’s job – say, carbon reduction, or export expansion, or domestic industrial policy?

“It raises the risk that it becomes a political document,” said former Bank of Canada governor Stephen Poloz, who oversaw the early stages of the mandate review before he retired from the post in mid-2020.

“I think the attention being given to [the mandate renewal] is healthy. … It’s too important for people to not care about it,” he said in an interview on Monday. “But … it runs the risk that it becomes more political than I would like.”

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‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

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HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

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REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Nova Scotia election: Liberals say province’s immigration levels are too high

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HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

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