Premiers’ ask for rate hold put Bank of Canada’s independence at risk: Macklem
Bank of Canada Governor Tiff Macklem warned premiers who publicly asked the central bank to not raise interest rates last month that their requests could undermine the institution’s independence.
The premiers of Ontario, British Columbia and Newfoundland and Labrador wrote to Macklem ahead of the Bank of Canada’s Sept. 6 rate decision, outlining concerns about the effects of higher rates on their residents and asking the central bank not to raise its key rate further.
In a Sept. 13 letter, Macklem warned that instructions or requests from elected officials could give the impression that the Bank of Canada’s independence is at risk.
The response was dated one week after the central bank governing council opted to hold its rate steady. Though Macklem acknowledged that higher interest rates are making life challenging for Canadians, he also noted that inflation, which higher interest rates are intended to combat, hurts the most vulnerable people in society.
The central bank operates independently from the federal government.
“While I am very pleased to get your perspectives on the impact of our policy decisions, instructions or requests from elected officials about how we should set interest rates could create the impression that the Bank of Canada’s operational independence is at risk. I am sure you agree that this would be unfortunate,” Macklem wrote in his responses to each of the premiers.
“Operational independence is critical to the legitimacy of the central bank, and to the effectiveness of monetary policy as a means to achieve price stability.”
B.C. Premier David Eby dismissed Macklem’s concerns when asked by reporters on Tuesday about the letter he received from the governor.
“I think the independence of Bank of
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