Finance

The House of Commons Standing Committee on Finance met to study the Bank of Canada’s Monetary Policy Report and its April 29 interest rate decision. Appearing as witnesses were Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers.

Governor Tiff Macklem stated that the economy is growing but is being buffeted by global events, with higher energy prices pushing inflation up and squeezing Canadians. He said the Bank held its policy rate at 2.25% and will look through the war’s immediate impact on inflation, but will not let higher energy prices become persistent inflation. Macklem noted that if the U.S. imposes significant new trade restrictions, the Bank may need to cut rates, but if oil prices stay high and inflation becomes generalized, consecutive rate increases may be needed. He also said artificial intelligence is expected to boost productivity growth, and that the government’s suspension of the fuel excise tax will lower inflation by about 0.2% temporarily.

Senior Deputy Governor Carolyn Rogers said that higher fuel prices have an immediate one-time effect on inflation, but the Bank is watching for signs that this spreads to other goods and services, which would indicate persistent inflation. She noted that while mortgage delinquencies remain historically low, delinquencies on non-mortgage consumer loans like car loans and credit cards have increased. Rogers added that targeted, temporary government support for low-income Canadians is appropriate, and that reducing interprovincial trade barriers and diversifying trade would help make regional economies like Atlantic Canada more resilient. She disagreed with any suggestion that the Bank’s balance sheet losses are a concern for monetary policy, stating the Bank does not set rates to maximize profitability.