In an interview Wednesday with CBC News Network Power & Politics Wednesday, Stephen Poloz, who served as Governor of the Bank of Canada from 2013 to 2020, said Canada’s inflation rate could fall below the official 2 percent target in a year or two, but achieved a less optimistic note about higher fuel costs. “We may have to pay more for oil and gas forever,” Poloz told host Vassy Kapelos. “And if that’s the case, it’s not inflation. It’s a higher price we have to pay and we have to adjust to that higher price somehow in our economy.” Earlier in the day, the Statistics Canada reported that Canada’s inflation rate had reached a 40-year high of 7.7%. While average food costs rose 9.7 percent last year, they are the highest cost of gas – 48 percent compared to a year ago – this is the single biggest factor influencing inflation. CLOCKS Call for dismissal of Bank of Canada governor is ‘pure politics’: Stephen Poloz
Call for dismissal of Bank of Canada governor is ‘pure politics’: Stephen Poloz
Former Bank of Canada Governor Steven Poloz joined Power & Politics on Wednesday to discuss the rising cost of living and Conservative leader Pierre Puliev’s call for the dismissal of current Bank Governor Tiff McLean. Poloz said the key question for Canada’s central bankers in trying to manage inflation is how high fuel prices end up affecting other parts of the economy. “This is the part that is under control, and this is the part that the central banks will respond to, not the energy cost itself,” he said. The bank has raised interest rates several times this year, citing inflation. The reference rate is currently 1.5 percent. The Federal Reserve recently raised its benchmark interest rate by 75 basis points to 1.75 percent, the largest increase in decades. Poloz said he expects inflation to start falling in the second half of the year, in part due to the tightening of the Bank of Canada. “I think people will be reassured by this,” he said.
Poloz defends central bank against criticism
Some politicians and economists have criticized the Bank of Canada for waiting too long to raise interest rates as demand for goods and services recovered from COVID-19-related downtime. However, Poloz defended the bank’s monetary policy, saying it was difficult to predict the effects of the Delta and Omicron wave waves on the economy. “We were quite resilient to them. So, of course, if you knew how things would turn out, I think you could have done it differently,” Poloz said. “But, of course, the fact is that we did not know how it would develop. And that’s why it’s right to be careful about that.” Poloz said a cautious approach to raising interest rates was necessary to protect himself from what he said was a greater threat than inflation – deflation or falling prices. He said a failure to hedge against deflation would have “threatened to create a second Great Recession”. “We should all be very happy that this was avoided.” Poloz added. Conservative candidate Pierre Poilievre has been particularly critical of the Bank of Canada’s monetary policy, accusing it of “printing money” and fueling rising prices. Poilievre said he would fire the current governor of the Bank of Canada, Tiff Macklem, if he becomes prime minister. Conservative MP Pierre Poilievre has vowed to fire Bank of Canada Governor Tiff Macklem if he becomes prime minister, a proposal that Macklem’s predecessor Stephen Poloz calls “unfortunate”. (Justin Tang / Canadian Press) Poloz described the proposal as “purely political” and “unfortunate”. He also did not accept the criticism of the institution he once led. “It is unfortunate that the policy is contaminating the monetary policy process. The central banks are designed to be separate from the policy and for very good reasons,” Poloz said. He said that traditionally, central banks are independent because of the threat of political pressure to ease interest rates and possibly cause inflation as a result – but now political pressures are coming from the other direction. However, Poloz said there was a silver lining in the criticism of the bank. “I am pleased that at the moment, the common perception is that inflation is bad and we need to fight it,” he said.
Higher interest rates would cause “pain”: NDP leader
NDP leader Jagmeet Singh said the higher borrowing costs of raising interest rates would hurt many Canadians. “Rising interest rates will make immediate, short-term pain even more difficult. Mortgage payments will increase, car payments will increase,” he told Power & Politics on Wednesday. “And that’s why we said the traditional response to inflation has always been to raise interest rates, and it will certainly reduce demand, but it will increase pain, so we said it could not be the only answer.” Singh also said he would like to see the federal government impose corporate tax contributions that can be redistributed to people and double GST / HST tax credit. WATCH NDP calls for doubling GST / HST tax credit
The NDP calls for a doubling of the GST / HST tax deduction
“Given the intensity of inflation … we need to help people now.” NDP leader Jagmeet Singh said he spoke with Prime Minister Justin Trudeau on Monday about the cost-of-living crisis. Singh, whose party supports the Liberal government in the House of Commons through a deal of trust and confidence, said he spoke to Prime Minister Justin Trinto by telephone yesterday about financial relief measures. Singh told host Vassy Kapelos that the Liberal government may not be able to count on his party’s support in Parliament if nothing is done to address the rising cost of living. “Our support to help pass bills is not something they can take for granted if they are not going to provide the help that Canadians need,” Singh said. Liberal MP and National Revenue Secretary Peter Frangiskatos said the gas tax holiday, a policy recently proposed by US President Joe Biden, was out of the question. “It should not be ruled out. The question is whether it will have an impact, it will have a substantial impact, a direct impact in the way some, including Conservative politicians, say it will,” he said. “It is not clear what will happen. It is such an unstable environment at the moment,” he said, referring to the war in Ukraine. CLOCKS MEPs are discussing tools for tackling the rising cost of living
MEPs are discussing tools for tackling the rising cost of living
Peter Frangiskatos, Parliamentary Secretary to the National Revenue Minister, and Dan Albas, a Conservative finance critic, joined Power & Politics on Wednesday to discuss rising living costs and what Ottawa can do to provide relief to Canadians. If Biden’s proposal for a “tax break” is successful, Canada will be the only G7 that will not introduce tax cuts or subsidies in response to fuel prices. Dan Albas, the Conservatives’ economics critic, said pump relief would have a positive effect on the rest of the economy. “Let us also remember that gasoline is the main driver of inflation, whether in the grocery store or in anything else, you have to have the transportation costs. [down]”, Said Albas.
