In recent weeks, the Bank of Canada has found itself the target of scrutiny and debate in the wake of soaring inflation. The Bank of Canada’s mandate aims to keep inflation “low, stable and predictable” and at a rate of between one and three per cent, but consumer prices increased 6.7 per cent year-over-year in March. Pierre Poilievre, the frontrunner in the Conservative Party leadership race, has been among the most vocal critics of the central bank and said this week that he would replace Bank of Canada Governor Tiff Macklem if elected.
On this episode of Editor's Edition, Yahoo Finance Canada's Alicja Siekierska and the Public Policy Forum's Sean Speer discuss the criticism being aimed at the Bank of Canada. Speer argues that the debate around the Bank’s decisions – as well as of other institutions – is justified in the post-pandemic recovery.
“It screwed up,” he said. “It only reinforces the case that we need, as a society and as a country, to create the space for more robust debate and discussion about our independent institutions.”
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SEAN SPEER: In recent days, Tiff Macklem, the bank governor has in effect recognized or acknowledged that choices that the Bank made over the past couple of years have contributed to these high rates of inflation. And that now necessitate the significant interest rate hikes to bring inflation under control, even if it comes at the expense of a recession. Well, I think that thinking is probably correct. I can't help but think that many Canadians have reason to be unhappy that mistakes on the part of the Bank of Canada have put us in this kind of unenviable position.
ALICJA SIEKIERSKA: Yeah, I think you've seen the Bank of Canada mandate is that 2% inflation rate, to keep it at that. And of course, over the last several months, we've had record highs, and I think the last CPI figure was something around 7.5%. So clearly, they're not fulfilling their mandate or haven't been in the last few months, and it has kind of put the Bank of Canada on a bit of the defensive. What do you make of that? Is that something that's justified for this institution?
SEAN SPEER: I think it is. There's a tendency in the Canadian commentariat to discourage any and all debate or criticism about the Bank of Canada due to its independent nature and that criticism amounts to a threat to the Bank of Canada's independence. People-- the people I'm referring to would probably disagree with that characterization but in effect, the way they talk about the Bank and the way they talk about criticism amounts to a kind of chilling effect on debate or discussion about the Bank's monetary policy. It screwed up, I mean, let's just put it bluntly. Tiff Macklem has implicitly acknowledged that it screwed up.
One can debate how and why it screwed up, maybe it was justified in screwing up because of the extraordinary challenge represented by the pandemic but it did. And it's now going to have to take action to try to bring inflation under control. And it seems to me, Alicja, that it only reinforces the case that we need as a society, as a country, to create the space for more robust debate and discussion about our independent institutions.
That's not saying that politicians ought to be interfering in the day-to-day functioning of the Bank but surely it shouldn't be off top-- surely it shouldn't be an issue that can't be debated or discussed in the public domain. It seems to be one of the reasons the-- the Bank of Canada made the mistake in judgments that it has over the past couple of years in large part because it was mostly free from scrutiny.
So I guess that's a really long way of saying I hope one of the lessons of this whole experience is that we are more inclined to kind of challenge and pressure test the choices and decisions being taken by independent parts of our government, including the Bank of Canada or the Supreme Court of Canada. These organizations are not infallible, and it seems to me it behooves us all to subject them to the same scrutiny that we would subject to any institution in our society.