Should the Bank of Canada’s mandate be reviewed?

This mandate, which was renewed and slightly amended in 2021, is defined by the Bank of Canada Act. According to the agreement concluded with the government, the central bank must support price stability and the maximum sustainable level of employment. That means his primary goal is to keep inflation low and stable over time.

And that’s why Tiff Macklem, governor of the Bank of Canada, said in an interview with Economic zone On Wednesday night, he really had no choice but to act the way he is doing now. Ithere is no easy way to restore price stabilityhe declared. This is not to say that it will be easy. I understand that many Canadians are in debt. And rising interest rates will put more pressure on them. It’s something we’re watching closely.

The bank raised its key rate from 0.25% to 3.75% between March and October, a rapid and historic rise that is not yet over, although it appears to be coming to an end. This rise in rates causes the economy to weaken. The housing market is down and consumer and business spending are slowing, prompting Tiff Macklem to say his policies are working.

Bank of Canada Governor Tiff Mackle during a press conference.

Bank of Canada Governor Tiff Mackle

Photo: The Canadian Press/PATRICK DOYLE

So far, we haven’t seen a big impact of interest rate hikes on inflationsaid the governor. : sur le marché du logement, par exemple, et les grands achats. On voit que les taux d’intérêt commencent à réduire l’activité et cela va atténuer les pressions à la hausse sur l’inflation. Donc, j’espère que bientôt on commencera à voir une baisse du taux d’inflation.”,”text”:”Mais on commence à voir les effets sur l’économie: sur le marché du logement, par exemple, et les grands achats. On voit que les taux d’intérêt commencent à réduire l’activité et cela va atténuer les pressions à la hausse sur l’inflation. Donc, j’espère que bientôt on commencera à voir une baisse du taux d’inflation.”}}”>But we are starting to see the effects on the economy: for example, the housing market and big purchases. We see that interest rates are beginning to reduce activity, and this will reduce the upward pressure on inflation. Hopefully, we will soon start to see a decline in the inflation rate.

At the cost of recession?

However, this rapid rise in rates is leading us into a recession, according to several economists. It won’t be a big contraction […]it won’t be a major recessionpointed out Tiff Macklem’s clarification, which evokes a form of stagnation of the economy until next summer with growth GDP around 0% in the next few quarters.

Yet thousands of Canadians face rising rates that significantly reduce their ability to meet all of their financial obligations. And from May to September, Canada lost nearly 100,000 full-time jobs. Raising rates, which is intended to calm inflation, has other effects, financial and economic.

That’s why economist and Senator Diane Bellemare thinks we need to adopt a mandate fight as in the United States: according to it, the goals of price stability and maximum employment must be placed on the same level. In Canada, however, the mention of employment occupies a less important place in the bank’s decision-making process.

In fact, it is up to the various governments and their fiscal policies in our country to maintain a sustainable level of employment. While in the United States the commitment of the Federal Reserve System is broader, in Canada we seem to rely more on some form of harmonization between fiscal and monetary policy.

This approach may not be optimal. With the Bank of Canada’s current mandate to deal almost exclusively with inflation, governments find themselves taking steps that effectively cripple the central bank.

In fact, as the economy slows, jobs are lost, the cost of living rises, we are currently seeing governments in Ottawa and several provinces, particularly Quebec, injecting billions of dollars into the economy in the form of aid. and controls. These are measures that can support inflation.

If the central bank took more into account the economic and employment situation, it might increase its interest rates more slowly. Perhaps it could have acted before March 2022, which would have had a less brutal impact on economic growth. And governments may have been less likely to want to step in and send money to taxpayers.

Can we criticize the Bank of Canada?

The current, very strange situation encourages us to question the work of the central bank and its mandate. Not only should Governor Mackle be asking questions about how he has dealt with inflation for over a year, which I have done, but it is imperative to confront the bank’s mandate with the real economy.

The rise in rates is strong, brutal, its effect on inflation will take time to show. Meanwhile, the economy is slowing down, people are getting into debt, and jobs are decreasing.

Tiff Macklem accepts criticism and questioning. It is clear that we are in a difficult period. Inflation is too high. The economy is starting to slow down. We raised interest rates sharply. Canadians and elected officials have many questions for us, and it’s easy to understand. We welcome comments and questions.

Head NPD, Jagmeet Singh is calling for a review of the mandate of the Bank of Canada, which he says is partly responsible for the recession that is being declared in Canada due to too radical measures.

Jagmeet Singh at a press conference.

Jagmeet Singh

Photo: The Canadian Press/Adrian Wyld

In a letter to Prime Minister Trudeau, Jagmeet Singh condemns Governor Macklem’s recent remarks who advised companies not to include higher wages in their employee contracts, even though wages are far from keeping pace with inflation.

This unique solution to inflationwrites, jThis is already setting the stage for a recession and making life more difficult for most people, especially working families and people on fixed incomes such as seniors and people with disabilities. Does the government believe that the Bank’s recent actions – dramatically raising interest rates, thereby undermining employment – are consistent with the objective of maximum sustainable employment?

Head NPD raises a fundamental question that deserves further discussion. Inflation especially affects the less well-off in society, but sudden increases in interest rates also have a major impact on the financial health of millions of households in the country.

The difference between Jagmeet Singh and Pierre Poiliever

It should be noted that Jagmeet Singh’s criticism is very different from that of Pierre Poiliever, the leader of the Conservative Party, who has promised to fire Tiff Macklem if he becomes Prime Minister of Canada.

It acted as the central bank for Pierre Poiliever ATM governments introduce cryptocurrencies during the pandemic the cure for inflation etc we need to give people the freedom to choose their own currency without the Bank of Canada interfering to print money and devalue the currency. These comments are misleading and have nothing to do with the vital and necessary debate we need to have about the Bank of Canada’s mandate and objectives.

Pierre Poilievre.

Conservative leader Pierre Poilievre

Photo: The Canadian Press/Adrian Wyld

This means that we cannot demand silence about the work of the Bank of Canada. We cannot blame the Minister of Health, Jean-Yves Duclos doubt the credibility of the central bank. According to him, the elect must do everything, maintain the central bank’s ability to do its job.

While it is true that Pierre Poiliever’s remarks raise some concerns about the Conservative Party leader’s respect for the country’s institutions, it is healthy to reflect, as Diane Bellemare or Jagmeet Singh did, on the work of the central bank and the need to plunge the economy into recession in order to reduced inflation.

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