Question Period: Bank of Canada’s Mandate

By: The Hon. Clément Gignac

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Hon. Clément Gignac: Honourable senators, my question is for the Government Representative in the Senate.

Senator Gold, as you know, today the Bank of Canada raised its key interest rate for the sixth time to 3.75% in the hope of taming persistent inflationary pressures. At a press conference earlier today, the Governor of the Bank of Canada, Tiff Macklem, said we should expect further interest rate hikes over the coming year to bring the annual inflation rate down to the 2% target.

More and more economists and experts, including former Bank of Canada governor Mark Carney, are telling the Standing Senate Committee on Banking, Commerce and the Economy that Canada is heading straight for a recession in 2023. Some parliamentarians and political party leaders believe that the Bank of Canada is making a mistake with its current policy and that, at the very least, its mandate should be revised to bring it into line with that of the U.S. Federal Reserve.

Senator Gold, does your government still have full confidence in the current Governor of the Bank of Canada, or does it intend to revise the Bank of Canada’s mandate sometime soon?

Hon. Marc Gold (Government Representative in the Senate): Thank you for your question. The Bank of Canada has an independent monetary policy that best suits the country’s economic situation. The bank’s mandate is to monitor and ensure the stability of the rate of inflation in the interest of all Canadians.

The bank has started to bring the inflation rate back within the target range and has the necessary tools and expertise to prevent inflation from becoming entrenched. The government believes that a sound monetary policy framework is the best weapon in its arsenal to protect Canadians against inflation.

Honourable senator, Canada has the lowest debt-to-GDP ratio in the G7, and the government has a plan to make life more affordable by providing direct support to the Canadians who are the most vulnerable to inflation and who need it most. As the Minister of Finance recently stated, and I quote, “Canada is a country of peace, order and good government.”

This institutional stability includes the independence of the Bank of Canada, which the government remains firmly committed to supporting. The independence of the Bank of Canada is essential, and we can have confidence in Governor Macklem’s leadership.

Senator Gignac: Thank you, Senator Gold. Your answer is reassuring, and I agree with you on the independence of the Bank of Canada with respect to political pressure. That said, we find ourselves in the context of a minority government that has the support of the New Democratic Party. Can you assure us that the Bank of Canada will continue to be independent over the next two years and that it will not be subject to constraints related to the context of this coalition?

Senator Gold: Thank you for the question. One of my former professors of constitutional law, Laurence Tribe, often said that if you live with a crystal ball, you must be prepared to eat glass once in a while. Personally, I do not have a strong enough stomach for that. I have no idea what will happen over the next two years, but I do know that the confidence and supply agreement contains a very specific list of the terms and conditions for maintaining the coalition, and I don’t think that this issue is on the list.

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