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Amid growing criticism, Macklem says Bank of Canada’s independence isn’t under threat

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Amid a flurry of criticism from politicians, pundits and interest groups, Bank of Canada Governor Tiff Macklem says he sees no threat to the bank’s independence.

“There is no concern that the bank’s independence is under threat,” Macklem said in an interview with the Canadian Press on Wednesday.

Central banks have come under intense scrutiny last year, both for their policy response to the COVID-19 pandemic and for the extraordinary steps they have taken this year to curb decades of high inflation.

“Yes, we’re getting a lot of tough questions. People should ask those tough questions. But I don’t see any threat to our independence,” Macklem continued. .

Since March, the Bank of Canada has raised key interest rates six times in a row, embarking on one of the fastest monetary policy tightening cycles in history.

Watch | Bank of Canada Raises Interest Rates Again.

Bank of Canada raises interest rate to 3.75%

Canada’s central bank has raised its benchmark interest rate to 3.75% as part of its ongoing effort to keep inflation in check. Bank of Canada Governor Tiff Mackrem said signs of a slowdown in the economy might keep inflation in check, but could lead to a recession.

The hike was in response to inflation reaching levels not seen in nearly 40 years. Canada’s annual inflation rate in September was 6.9%. It has been steadily declining since reaching a year-high of 8.1% in June.

The ongoing rate hike cycle has sparked significant criticism from progressive voices concerned about its impact on employment.

Critical Independence: Macklem

In a letter to Prime Minister Justin Trudeau on Oct. 21, NDP leader Jagmeet Singh said he supported central bank independence but warned that further interest rate hikes would have “a serious impact on families.” Stated.

When asked by reporters about the letter on Tuesday, Finance Minister Chrystia Freeland acknowledged the economic pain facing Canadians, but said the independence of the Bank of Canada will play an important role in ensuring stability. Institutional stability is important in times of economic hardship because it is fulfilling its mission.

Singh’s criticism didn’t stop the Bank of Canada from announcing a rate hike of 0.5% on Wednesday, suggesting the hike is not yet complete.

At a press conference on Wednesday, Macklem said the Bank of Canada was facing difficult decisions and that when decisions are difficult, the independence of the central bank becomes more important.

He later repeated that message in an interview with the Canadian Press.

“A lot of people have given me advice on what to do,” said Macklem.

But there is a reason central banks are independent institutions, he added.

Watch | Poilievre criticizes government for increased use of food banks.

Polyvre, Gould Debate in House of Representatives Over Increased Use of Food Banks

Opposition leader Pierre Polivre has challenged Family Minister Karina Gould over a report that says up to 1.5 million Canadians are using Canadian food bank services this year.

“The reason is that there are difficult decisions to be made and we have to look at the long term. And it is during these difficult times that we understand the value of central bank independence.”

Criticism of the Bank of Canada in Ottawa is most notable, beginning with opposition leader Pierre Polivre, who vehemently criticized the central bank’s bond-buying program at the start of the pandemic.

He argued that banks printed money to enable federal spending, thereby accelerating inflation. Polivre, while running for leader of the Conservative Party of Canada, vowed to sack Mackrem if he became Prime Minister, but given that the Bank of Canada Act does not give him that power, how he It did not say whether there were plans to dismiss the governor.

On Sunday, as the government prepares for Thursday’s fall economic statement, Polivre released a letter to Freeland outlining his demands for the financial aspects of Canada’s economic policy. He called for a halt to tax increases and for new spending to be “matched with comparable savings.”

Stimulus package should have ended sooner: lieutenant governor

Mackrem was appointed by the bank’s board of directors with the governor’s approval at the council for a term of seven years. His term is until June 2027.

In response to allegations that the Bank of Canada printed money, the central bank took to social media this summer to try to set the record straight, but that didn’t stop members of the Conservative Party from attacking the central bank. did.

Many economists and market watchers have criticized the Bank of Canada for not raising interest rates sooner, and the central bank itself has suggested the stimulus is too long.

Last month, Bank of Canada Deputy Governor Paul Baudry said in hindsight that the government and central bank should have withdrawn stimulus early as the economy had recovered from the COVID-19 pandemic.

Well, the Bank of Canada has swung in the opposite direction this year, aggressively raising interest rates and sparking new criticism.

In its latest monetary policy report, the Bank of Canada revised its economic forecasts and now describes a significant slowdown.

Listen | What economic news means for Canadians:

sunday magazine18:40What Rate Hikes, Inflation, Debt and a Possible Recession Mean for Canadians

We expect economic growth to slow by the end of this year and in the first two quarters of 2023, to between 0 and 0.5%, before gaining momentum in the second half of next year.

The Bank of Canada intends to fulfill its mandate and has repeatedly indicated that restoring price stability is a primary focus.

Singh’s recent letter to the prime minister is part of a growing call for the central bank to stop raising rates, or at least take a more cautious approach to raising rates.

Labor Party opposes banks

Labor groups in particular have been vocal about this issue.

“The Bank of Canada is determined to push the economy into recession regardless of the impact on individual Canadians who may lose their jobs, homes and quality of life,” said Bea Bruske of the Canadian Labor Council. The chairman said in a statement after Wednesday’s interest rate decision.

“Canadian trade unions are calling on the Bank of Canada to suspend rate hikes until the impact of previous policy interventions becomes clear.”

Macklem said the central bank aims to balance risks when raising interest rates, but said any half-baked decision would mean Canadians would suffer high inflation for a long time.

“Especially at this time, we are acutely aware of the enormous impact the Bank of Canada has on the lives of Canadians, and it is a great responsibility,” said Macklem.

With Canadians feeling uneasy, the governor said the central bank has a responsibility to be transparent and instill confidence in the public that inflation will come down.

“I want to go faster, but it will take time.”

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