OTTAWA — The governor of the Bank of Canada has laid down an argument for the central bank’s actions during the pandemic, hours after the country's opposition leader suggested the bank stay in its inflation-targeting lane.
The Bank of Canada enacted extraordinary measures during the pandemic to keep credit flowing and encourage low interest rates to spur demand.
Its program to purchase government bonds, known as quantitative easing, encouraged low rates on things such as mortgages and business loans while keeping borrowing costs low for a federal government spending historical amounts on emergency aid.
Speaking to a conference of central banks, Tiff Macklem said creating an inclusive recovery was fundamental to the central bank's role in helping to manage the economy.
Macklem echoed calls earlier in the day by his American counterpart that leaving untouched entrenched inequalities holds back some citizens and economies from realizing their full potential.
Macklem also said talk about how to create an inclusive recovery shouldn't be seen as an expansion of central bank mandates, but rather it is already part of their marching orders.
"This conversation in central banks has sparked a debate about whether central banks are expanding their mandates, whether we're overreaching and getting distracted from our focus on inflation targeting, and even a criticism that we should stay in our lane," he said Tuesday.
"My own view is that we are tasked with serving our citizens, not some of our citizens."
Macklem made the comments to end the conference on diversity and inclusiveness organized jointly by the Bank of Canada, the U.S. Federal Reserve, the Bank of England and the European Central Bank. The Bank of Canada is set to host the conference next year.
But before that, the federal government has to renew the Bank of Canada's mandate, which has happened every five years over the last three decades.
The bank has been charged with anchoring inflation to between one and three per cent, a range that often sees it target price increases to roughly two per cent.
The pandemic upended the central bank's inflation framework, first by dropping inflation in 2020 to 0.7 per cent, and now sending the consumer price index to an 18-year high — the annual inflation rate was 4.4 per cent in September — amid supply-chain issues that Macklem has warned will push up inflation rates further, keeping them higher for longer.
The inflationary roller-coaster has sparked calls on Parliament Hill from the Opposition Conservatives that the central bank's own actions, coupled with historic deficits, are driving up the cost of living.
Speaking to reporters earlier in the day, Conservative Leader Erin O'Toole warned Prime Minister Justin Trudeau that the central bank's marching orders should focus only on inflation-targeting and nothing more.
"We're really worried about our economic future," O'Toole said after unveiling Pierre Poilievre, a frequent critic of the central bank, as his new finance critic.
"We also don't think the mandate of the bank should be extended — we've been very clear on that — to include a range of other factors. We have to focus on our fundamentals."
A decision on the central bank's mandate should be made by the end of this year, or early next.
The Tories have also taken aim at the central bank's quantitative easing program, which reduced returns on short-term government bonds and likely made buyers think more about long-term bonds that lock in debt at today's low interest rates.
Macklem said Tuesday that the bond-buying program challenged public perceptions of the Bank of Canada's independence from political influence.
He also said it is more important than ever for central banks to be clear about their actions and objectives.
"Trust comes when everyone understands the actions we are taking, and why," he said.
This report by The Canadian Press was first published Nov. 9, 2021.
Jordan Press, The Canadian Press