Despite growing criticism, Bank of Canada Governor Tiff Macklem does not believe the institution’s independence is under threat.
“It doesn’t worry me at all,” Macklem said in an interview this week with The Canadian Press.
In recent years, the central bank has often found itself in the spotlight, in particular because of its policies to revive the economy in times of pandemic and the rigorous tightening of its monetary policy to fight against inflation.
“Yes, we raise difficult questions. People have to ask us tough questions, but I have no fear for our independence,” Mr. Macklem said.
Since March, the Bank of Canada has raised its key interest rate six times in a row, implementing one of its fastest monetary policy recovery cycles in its history.
She hopes in this way to combat inflation which has reached a plateau unmatched for at least four decades. In September, the annual inflation rate was 6.9% in the country, down 1.2 percentage points since June.
This policy has also been questioned by progressives who worry about the consequences for employment. Many observers believe that this upward trend in interest rates will trigger a recession.
For example, NDP Leader Jagmeet Singh wrote in a letter to Prime Minister Justin Trudeau. While he supports the independence of the Bank of Canada, he warns that another hike in interest rates “will have serious repercussions on families”.
But Singh’s criticism didn’t stop the central bank from raising its key interest rate by half a percentage point on Wednesday and warning it could do so again.
During his press briefing, Mr. Macklem said that the Bank of Canada had to make difficult decisions. It’s at times like this that his independence becomes more important.
He repeated this remark during his interview with The Canadian Press.
“A lot of people are giving us advice on what to do,” Macklem said.
But there is a reason why central banks must retain their independence, he adds.
“That reason is that we have to make difficult decisions and we have to consider them in the long term. When times are tough, we can see the importance of central bank independence. »
One of the biggest critics of the Bank of Canada is the leader of the opposition, the conservative Pierre Poilievre. In particular, he condemned his government bond program at the start of the pandemic.
He claims that the Bank of Canada printed money to allow the federal government to implement aid programs, which would have fueled inflation. Mr. Poilievre promised to fire Mr. Macklem during his campaign to become leader of the Conservative Party of Canada. However, nothing in the law gives him this power.
Tiff Macklem has been appointed by the Governing Council of the Bank of Canada. This appointment was subsequently approved by the Governor in Council. His seven-year term is due to end in June 2027.
In its latest monetary policy report, the Bank of Canada revised its economic projections. It now takes into account a marked global economic slowdown.
“Growth should then decelerate to between 0 and 0.5% until the end of 2022 and the first half of 2023 (Table 3 and Chart 14). This suggests that, for a few quarters, growth could just as easily be a little below zero as it could be slightly positive,” the report reads.
Canadian unions also condemn the policy of the Bank of Canada.
“The Bank of Canada is determined to push the economy into a recession, regardless of the impact on Canadians who could lose their jobs, their homes and their quality of life,” said Labor Congress President of Canada, Bea Bruske after the last rate hike.
“Canada’s unions are calling on the Bank of Canada to stop raising interest rates until the impact of past policy actions is clear,” she added.
Mr. Macklem explained that the central bank tries to properly weigh the risks when it raises its key rate. If she is too timid, Canadians could suffer from inflation for a longer period of time.
“I am fully aware that the Bank of Canada is having a great impact on the lives of Canadians, especially at this time. And it is a very big responsibility. »
The governor recognizes that the central bank must be transparent in its decisions and establish with the population the confidence that inflation will fall.
“I would like to get there faster, but we will get there eventually. »