(Bloomberg) — Finance Minister Chrystia Freeland defended the Bank of Canada’s independence after the main left-leaning opposition party joined the Conservatives in criticizing its record.
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“Canada is a country of peace, order and good government,” Freeland told reporters Tuesday on her way into a cabinet meeting. “Institutional stability very much includes the independence of the Bank of Canada. Our government respects very much the independence of the Bank of Canada.”
On the weekend, New Democratic Party Leader Jagmeet Singh told CTV News that Governor Tiff Macklem’s increases to interest rates are without merit and urged the Liberal government to do more to cushion the blow of inflation.
Singh also wrote to Prime Minister Justin Trudeau directly, flagging recent changes in the government’s mandate agreement with the central bank that added labor-market conditions as a secondary consideration to price stability.
Freeland acknowledged the increasingly difficult circumstances Canadians face. Her comments, made a day before Macklem is expected to deliver a fifth-straight outsized interest-rate hike, show monetary policy is becoming politicized.
“Inflation is too high, life is really tough for a lot of people, and rising interest rates are posing another set of challenges,” she said. “People are worried about their mortgages.”
But she gave no indication the government would add to the targeted spending it announced in September. Those measures include a temporary doubling of a sales-tax rebate for low-income earners, a one-time top-up for renters who can’t pay their bills, and new dental care coverage for uninsured children.
“We really believe it’s important to have a fiscally responsible approach right now,” the finance minister said. “We really understand the value of not pouring fuel on the flames of inflation and of not making the Bank of Canada’s very tough job even harder.”
While Singh acknowledged the importance of central bank independence, his comments ratchet up pressure on both the government and Macklem. Earlier this year, the NDP agreed to support the Liberals in the minority parliament until 2025 in exchange for more social spending.
The Bank of Canada is also taking heat from the other side of the political spectrum. The Conservatives are vowing “ruthless scrutiny” of the governor, whom the party’s new leader has threatened to fire for helping drive inflation to a multi-decade high.
Macklem and his officials have increased borrowing costs by three percentage points since March. They are expected to hike by another 75 basis points on Wednesday, bringing the benchmark overnight lending rate to 4% — the highest since March 2008.
Even Liberals are starting to criticize the central bank.
Tyler Meredith, who was Freeland’s director of economic strategy until last month, publicly urged Macklem to show “flexibility” and consider easing his foot off the brakes. “There is ample evidence for the Bank of Canada to begin to slow down and potentially pause. They should heed it,” the former aide wrote Tuesday in an opinion piece for The Globe and Mail newspaper.
Speaking in a Bloomberg interview last week, Meredith warned that inflation hurts the poor the most, arguing it therefore risks undermining Trudeau policies that have sought to reduce wealth inequality.
(Updates with Singh letter to Trudeau and oped by former Freeland aide.)
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