Bank of Canada ‘remains independent’ despite political commentary, says Macklem – National
Bank of Canada Governor Tiff Macklem on Thursday reaffirmed the central bank’s independence in response to politicians who have weighed in on the institution’s interest rate decisions over the past week.
“I am confident that the Bank of Canada remains independent,” Macklem told reporters in Calgary.
“We have a clear mandate. Canadians expect us to control inflation, and we are.
Macklem’s comments come a day after the Bank of Canada opted to keep its benchmark interest rate unchanged.
Chrystia Freeland, Deputy Prime Minister and Minister of Finance of Canada, called the decision a “welcome relief” for Canadians who are feeling the effects of rising interest rates on their mortgages.
Prior to this decision, three prime ministers wrote to the Bank of Canada asking the institution not to raise interest rates to avoid further suffering for Canadians.
The Bank of Canada is an independent institution responsible for setting the country’s monetary policy; it receives its inflation-targeting mandate from the federal government, but sets interest rates and otherwise operates independently.
Some players in the Canadian economic landscape took umbrage at the comments of Freeland and the premiers.
Derek Holt, vice president and head of capital markets economics at Scotiabank, said in a note on Wednesday that the political comments were “unnecessary.” He said Freeland’s statement that she would work “to ensure that interest rates can come down as quickly as possible” was “out of the purview of a finance minister.”
Holt argued that such comments could shake global opinion of Canada’s financial system if observers begin to believe the central bank is subject to political interference.
Macklem was asked Thursday, after a speech before the Calgary Chamber of Commerce, if he thought Freeland’s comments were appropriate.
He said he understands elected officials are hearing Canadians talk about the pain that high inflation and higher interest rates have inflicted on their constituents, and acknowledged that rate hikes so far have “compressed » some households.
But Macklem also said the Bank of Canada’s operational independence is “more important when decisions are tough.”
“Unfortunately, there is no painless way to restore price stability,” he said, supporting the monetary policy decisions taken so far by the Bank.
Macklem added that Freeland has “made it very clear that it fully respects the independence of the Bank of Canada.”
This is not the first time that the Bank of Canada has found itself at the center of political debates.
Pierre Poilievre made headlines last year as he campaigned for the leadership of the Conservative Party by saying he would fire the governor of the Bank of Canada if he were prime minister. NDP Leader Jagmeet Singh has also called for changes to the central bank’s mandate to consider a dual focus on jobs.
Poilievre and Singh have attacked the Liberal government’s economic management in recent months for putting the Bank of Canada in a position to raise interest rates.
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