of bank of canada The federal government could have gotten off gas sooner in stimulating the economy during the COVID-19 pandemic. Tiff Mackrem Speaking Wednesday, he added that with the benefit of hindsight, it was only now that his knowledge was clear.
Macklem and Senior Lieutenant Governor Carolyn Rogers spoke to the House of Representatives Standing Committee on Finance on Wednesday night and received tough questions from members of Congress about the implications of higher prices. degree of interest On the effects of Canadian finances and central bank monetary policy decisions on inflation.
The bank’s base rate has risen 3.5 percentage points since March to curb the rise in the cost of living, but Macklem said Wednesday that the Bank of Canada is “in line with its goal of ensuring it remains “low, stable and predictable”. It’s still a long way off,” he said. inflation.
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annual inflation rate Flat at 6.9% across Canada in October — Down from the peak of 8.1% seen in June, but still well above the central bank’s target of 2%.
“This tightening phase is coming to an end.
The US Federal Reserve, the Bank of Canada’s counterpart south of the border, also said the pace of rate hikes could soon slow, according to recently released minutes from an early November meeting. suggests that there is
But Macklem said Wednesday that while inflation was initially a global phenomenon, with supply chain problems and the war in Ukraine, if central banks had stopped stimulating the economy sooner during the COVID-19 pandemic , admitted that it might not have been so bad.
Interest rates were as low as 0.25% in 2020-2021 and banks were engaged in quantitative easing. Added bonds to the balance sheet to further reduce interest rates and stimulate the economy. Macklem said the practice he ended more than a year ago, after which banks began tightening quantitatively by expiring existing bonds.
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However, in response to questions from Conservative MPs Marty Morantz and Andrew Scheer, Macklem conceded that stimulus monetary policy could have been lifted sooner.
“If a year ago we knew everything we know today, I think we should have started tightening rates sooner to pull back the stimulus.”
Bank of Canada Senior Vice Governor Paul Baudry He also said in his speech in September An early lifting of stimulus globally could have kept inflation in check.
Macklem ultimately did not view the Bank of Canada’s monetary policy response to the pandemic on Wednesday as a failure. Instead, he called for a review of banks’ own responses to economic uncertainty and how effective their tools have been in mitigating the impact of the pandemic and the impact of the recovery.
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“If inflation returns to 2%, I think we will have to thoroughly review how all our tools have worked through this pandemic,” he said.
“I’m not saying everything is right. Not everything is right. I think we did a lot of things right and there are some lessons to be learned.”
Government spending should be targeted and temporary: Macklem
Morantz also asked Macklem whether inflation would have been lower had there been less stimulus from federal spending on the pandemic.
“For example, if deficit spending had been half that, $250 billion instead of $500 billion, would inflation have been lower?” Morantz asked.
“There would have been less stimulus to the economy, less demand, less (inflation),” Mr. Mackrem said.
He added that governments seeking to provide inflation relief to Canadians would need to opt for targeted and temporary measures.
Conservative MP Adam Chambers has asked the governor whether a direct remittance to low-income Canadians or an energy relief package would be a better way to provide relief without accelerating inflation. .
In response, the governor said targeted temporary measures would not encourage inflation any more than broader ones.
“Policies aimed at mitigating the impact of inflation on citizens need to be truly targeted, targeted at the most vulnerable, temporary, transitory, but this It’s a matter of,” said Macklem.
The federal government, along with provincial governments, has responded to high inflation with measures aimed at softening the financial blow to Canadians. Some measures target low-income earners, while others are far-reaching.
The federal government recently doubled its GST rebate temporarily.
States have also taken remedies and some have chosen to send checks more widely.
Most recently, Alberta Premier Daniel Smith Numerous measures to ease inflation announced This includes a payment of $600 per child for families earning less than $180,000 a year. The same income standards and benefits apply to older people.
— Using files from The Canadian Press
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