Premier David Eby welcomes the Bank of Canada’s decision to hold the overnight rate at 5 per cent, saying that it “offers some relief.”
But he also signaled that he won’t refrain from commenting on decisions by the Bank of Canada and its governor, Tiff Macklem.
“It is important for decision-makers to hear from people what the actual effects are on the ground — my job as a premier is to communicate that to him,” he said.
Eby made these comments Wednesday (Oct. 25) at an unrelated event at the legislature, shortly after the Bank of Canada had announced that it would keep its overnight rate at 5 per cent, as many had expected. The bank also held the rate at 5 per cent in September after having raised it 10 times since last year. The current rate of 5 per cent is the highest in 22 years. On April 13, 2022, the rate was 1 per cent.
The Bank of Canada, like central banks around the world, has been steadily raising interest rates to fight inflation in the face of excessive savings during the COVID-19 pandemic and rising energy prices following Russia’s invasion of Ukraine.
Global inflation pressures are easing though, a point shining through the Bank of Canada’s statement explaining its decision.
“Inflation has been easing in most economies, as supply bottlenecks resolve and weaker demand relieves price pressures,” it reads. “However, with underlying inflation persisting, central banks continue to be vigilant. Oil prices are higher than was assumed in July, and the war in Israel and Gaza is a new source of geopolitical uncertainty.”
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The statement also points to “growing evidence that past interest rate increases are dampening economic activity and relieving price pressures.” Consumer spending has weakened, leading to softer demand for housing, durable goods and many services, it adds.
“A lot of families in our province are on the edge right now and the reason why they are on the edge is an unprecedented run-up in interest rates,” Eby said, pointing to their effects on mortgage rates. Higher interest rates have also put a number of rental construction projects on hold, “causing rents to go even higher and feeding inflation, rather than reducing inflation,” Eby added.
Wednesday was the second in as many days that Eby faced questions about the Bank of Canada after the public found out about a letter that Macklem had sent to Newfoundland and Labrador Premier Andrew Furey, in which Macklem warned of political interference. Furey, along with Eby, was among several premiers, who had written to Macklem.
Eby confirmed that he also received a similar reply from Macklem about the Bank of Canada’s independence.
“I think the independence of the Bank of Canada is just fine and he will be okay,” Eby said Tuesday. “I think it’s critical that the premiers share information with decision-makers like Mr. Macklem.”
Eby said it is his job as premier to share B.C.’s perspective. “I’m going to share that information, advocating for British Columbians — I make no apologies for that.”
@wolfgangdepner
wolfgang.depner@blackpress.ca
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