Politics

Inflation relief measures should be well targeted and temporary, says Macklem

Governments looking to provide inflation relief to Canadians should choose measures that are well targeted and temporary, Bank of Canada governor Tiff Macklem told a House of Commons committee meeting Wednesday.

Bank of Canada has raised interest rates six consecutive times since March

Tiff Macklem, governor of the Bank of Canada, speaks during a news conference in Ottawa on April 13, 2022. On Wednesday, Macklem answered questions from MPs at the House of Commons standing committee on finance. (Justin Tang/Bloomberg)

Governments looking to provide inflation relief to Canadians should choose measures that are well targeted and temporary, says Bank of Canada governor Tiff Macklem.

At a House of Commons committee meeting Wednesday, Conservative MP Adam Chambers asked the governor which of two options is a better way to deliver relief without fuelling inflation: direct transfers to low-income Canadians or energy relief packages.

In response, the governor said targeted and temporary measures fuel inflation less than broad-based ones.

"Policies aimed at mitigating the effects of inflation on citizens really need to be targeted, targeted on the most vulnerable, and temporary, temporary while this is an inflation problem," Macklem said.

Softening the blow

The federal government along with provincial governments have responded to high inflation with measures aimed at softening the blow on Canadians' finances. While some measures have been targeted to lower-income earners, others have been broad-based.

The federal government recently temporarily doubled the GST rebate, a benefit that goes to low- and modest-income Canadians.

Provinces have also delivered relief, with many opting to send cheques out more broadly.

Most recently, Alberta Premier Danielle Smith announced a slew of inflation relief measures Tuesday, which include $600 payments per child for families earning less than $180,000 a year. The same income threshold and benefit applies to seniors.

WATCH | Macklem on how the bank will fight inflation:

Bank of Canada governor explains how far he’s willing to go to get inflation under control

16 days ago
Duration 8:52
In a wide-ranging interview, Bank of Canada governor Tiff Macklem says Canadians should expect more interest rate hikes, and a mild recession is possible, as the central bank continues its fight against inflation.

Macklem, along with senior deputy governor Carolyn Rogers, answered questions from MPs at the House of Commons standing committee on finance.

The Bank of Canada officials faced questions about the central bank's policy decisions in the face of decades-high inflation.

In October, the annual inflation rate was 6.9 per cent, down from a peak of 8.1 per cent in June.

Since March, the Bank of Canada has raised interest rates six consecutive times and is expected to announce another rate hike in December.

Singh makes rare committee appearance

Party leaders typically don't sit on committees, but the NDP's Jagmeet Singh — who has been critical of the central bank in recent weeks — made a rare appearance to ask Macklem questions face to face.

Singh asked if the Bank factored in the burden Canadians would feel from higher interest rates when making their decisions.

"How much pain is too much pain?" Singh asked.

Macklem said he is aware that the bank's actions are having an impact on Canadians, but that if they don't raise interest rates to bring inflation down, the the results would be far worse.

"We don't want to make this more difficult than it has to be," he said.

Conservative Leader Pierre Poilievre — who has said he would fire Macklem if the Conservatives form government — didn't join Singh at committee. But the Conservative MPs that were present questioned the decisions the bank has made over the past few years, including measures taken to stimulate the economy during the height of the pandemic.

In response, Macklem said the measures lead to a strong recovery, but in hindsight he would have attempted to tackle inflation earlier.

"If we knew everything a year ago that we know today, yes, I think we should have started tightening interest rates sooner," he said.

With files from Darren Major

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