Finance Minister Chrystia Freeland said the federal government was prepared to take additional steps to offset rising cost of living if inflation continues to rise.
“We’re not closing any doors,” Freeland told reporters in Toronto on June 20.
However, for now, the finance minister said he feels he has done a lot. Last week, Freeland notably used his first speech on the economy in months to project the $8.9 billion Prime Minister Justin Trudeau’s government intends to spend over the next few years on affordable measures.
Freeland said she was inclined to keep a lid on the new measures because additional spending and/or tax cuts could drive up demand, adding additional pressure on prices. However, when asked about the effectiveness of reducing gasoline taxes, he said fiscal policy would depend on whether inflation calms down.
“I made it clear that we take the need for fiscal constraints seriously,” Freeland said. “Having said that, we are not closing any doors and we are going to address the affordability challenges Canadian families are facing very carefully and we are prepared to do more if necessary. “
Canada’s inflation hit 6.8 percent in April from a year earlier, one of the fastest rates since the early 1980s, according to data from Statistics Canada. The country will get an updated reading on the figures this Wednesday.
A new report from the Bank of Nova Scotia chief economist Jean-François Perrault, a former senior finance department official, argues that the federal government should combine Bank of Canada interest rate hikes with big spending cuts. Perrault said raising borrowing costs by Bank of Canada Governor Tiff McCalem to combat inflation is weighing on businesses.
“I think we’ve already done that,” Freeland said when asked about Perrault’s report, adding that his latest budget represents the sharpest reduction in COVID spending among the world’s richest countries, Although he neglected to add that he also had emergency expenses. among the most generous.
Freeland said the task of reducing inflation was “primarily” the responsibility of the Bank of Canada, adding that he had no intention of interfering with the work of the Monetary Authority.
Macklem has monitored three consecutive interest rate hikes this year, including unusually large half-point increases in April and June. The policy rate currently stands at 1.5 per cent, and Macklem has said he may need to push it above three per cent to bring inflation under control.
Freeland made the remarks at a joint press conference with United States Treasury Secretary Janet Yellen, who traveled from Washington, DC to Toronto for a day of meetings and public events with her Canadian counterpart.
Yellen, a former US Federal Reserve chair, said she agreed with Freeland that inflation was primarily a battle for central banks. Price pressures south of the range are even more intense, prompting the Fed to increase its policy rate by three quarters last week.
“That said, President Biden will support some complimentary fiscal actions that complement and support what the Fed is doing,” Yellen said.
Yellen also pointed to other global factors that are weighing on fragile supply chains and causing inflation to run more quickly, such as pandemic lockdowns in China as the country pursues a COVID-zero policy And the Russian invasion of Ukraine has added to the already challenged supply chain system.
Earlier, during a moderate talk at the Rotman School of Management at the University of Toronto, Yellen and Freeland elaborated on “friend-shoring”, an emerging shift in the global order that allows democratic countries to interact more with each other. while doing business, while limiting their engagement. Countries like China and Russia.
Yellen noted that negotiations are still in their early stages, but the US has established several task forces with European allies and established a partnership with Indo-Pacific countries to identify areas where global supply The chain needs to be strengthened.
“It’s going to be a big economic and geopolitical issue that we’re going to debate and deal with,” Freeland said of the friend-shoring idea. “The world hasn’t really started yet on exactly what a big deal this is.”
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