Freeland calls Bank of Canada’s interest rate decision ‘welcome relief’
Federal Finance Minister Chrystia Freeland issued a rare public response to the Bank of Canada’s interest rate decision on Wednesday.
“The Bank of Canada’s decision to maintain its overnight interest rate is welcome relief for Canadians,” said Freeland in an unsolicited media statement. She also made a point of reasserting the central bank’s independence.
“As finance minister, I fully respect the independence of the Bank of Canada as it delivers on its mandate to return inflation to target,” she said.
Her statement follows a week when the bank faced rare and public political pressure from three premiers calling for a halt to interest rate hikes.
B.C. Premier David Eby, Ontario Premier Doug Ford and Newfoundland and Labrador Premier Andrew Furey all sent letters to Bank of Canada Governor Tiff Macklem claiming rising rates are making the cost-of-living crisis worse.
WATCH | Freeland reacts to Bank of Canada decision
Finance Minister Chrystia Freeland commented on news that the Bank of Canada would hold interest rates at 5 per cent. She said her priority is to ensure interest rates come down ‘as soon as possible.’
At a news conference later in the day, Freeland was asked whether it was appropriate for politicians to be seen attempting to influence the Bank of Canada’s decisions.
“I’m going to speak for myself. I have a very specific job and a very specific role … I’m the finance minister,” she said. “That means it’s really incumbent on me to support the independence of the Bank of Canada.”
The central bank has raised the rate 10 times over the past 18 months.
“Inflation has fallen from a peak of 8.1 per cent in June 2022 to 3.3 per cent in July of this year,” said Freeland. “However, the elevated interest rates being used to bring down inflation are weighing heavily on Canadians.”
Political pressure turns to feds
The moment the interest rate decision was announced, political pressure shifted from the Bank of Canada to the federal government.
“It’s time for Justin Trudeau, whose government sets the mandate for the Bank of Canada, to clearly give the message that policies that hurt workers and hurt families are wrong,” said NDP Leader Jagmeet Singh during a caucus retreat Wednesday morning in Ottawa.
CBC News followed up with the NDP to ask what Singh meant by that.
The leader’s office cited a quote from former Bank of Canada governor David Dodge, who told CBC News on Tuesday that “there’s always a dialogue between the minister of finance and the governor of the bank, between public servants in (the federal Department of Finance) and staff at the bank.”
Singh’s office said the Liberals can use those discussions to request a freeze on rate increases.
Freeland didn’t address Singh’s comments directly when asked about them by reporters.
“I was clear in my remarks and my statement today,” she responded. “Our government understands how important an independent central bank is to Canada more broadly.”
Despite this latest pause on interest rates, Singh said they’re still higher than they’ve been in two decades.
“Last month, our economy slowed down. And while the bankers at the Bank of Canada may think that is good news, here is what that actually means for families: fewer jobs, fewer homes they can afford, and less money to buy the things their kids need,” said Singh.
WATCH | Former Bank of Canada governor reacts to decision to pause rate hikes
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‘The Bank is acting in their best judgement … to fulfill the mandate that the government has given them,’ former bank governor David Dodge told Power & Politics Wednesday. ‘We’re in a period where growth is going to be sufficiently below potential that it really is dragging down the rate of inflation.’
The topic of interest rates was notably absent from the Conservative leader’s remarks on Wednesday.
Pierre Poilievre spoke in Quebec City ahead of his party’s policy convention. He didn’t weigh in on the rate decision at all.
When asked for comment later, Poilievre’s office emailed a written statement blaming Trudeau’s “out of control inflationary spending” for “unprecedented interest rate hikes.”
“Despite declaring ‘victory’ over inflation only a few months ago,” the statement said, “Trudeau’s finance minister now applauds a five per cent interest rate, marking an 1800 per cent increase under their watch.”
Speaking in St. John’s moments after the Bank of Canada’s announcement, Furey defended his decision to write to the bank’s governor.
“It’s my job as premier of Newfoundland and Labrador to advocate on behalf of the people of Newfoundland and Labrador,” he told reporters. “So I thought it was appropriate ahead of today’s announcement, whatever the governor decided, to express my view … on where we are right now with respect to interest rates and inflation.”
Critics have claimed the premiers’ attempts to pressure the bank crossed a line and jeopardized the bank’s independence, impartiality and non-partisan nature.
