Ottawa’s decision to increase its already high levels of spending and continue budget deficits will hinder the Bank of Canada's (BoC) efforts to control inflation and lead to higher prices for goods and services, according to a new study released by the Fraser Institute.. Bank of Canada .The “Canada's Fiscal Policy Has Undermined Efforts to Tackle Inflation” study was released by the independent and non-partisan public policy think tank on Friday..During the COVID-19 lockdowns in 2020, Justin Trudeau’s federal government, which was already spending at record-high levels, further increased spending while the BoC lowered interest rates to near zero..Those two decisions contributed to higher inflation, which reached a 39-year high of 8.1% in July 2022. According to the latest data available from Statistics Canada, inflation in February remained at 5.2%..To discourage consumer spending and cool price increases, the BoC significantly increased its policy interest rate. However, the federal government continued to increase deficit-financed spending and ran a string of large deficits, including a projected $40.1 billion deficit for 2023-24..The Fraser Institute's study suggests Ottawa's refusal to restrain spending will undermine the BoC's efforts to control inflation, as high government spending and deficits helped trigger today's inflation rate..“Until the federal government shows some spending restraint, Canadians may continue to face higher prices for goods and services,” said Philip Cross, former chief economic analyst at Statistics Canada, senior fellow at the Fraser Institute and author of the study..“Monetary policy and fiscal policy must work together to reduce inflation ... a lesson the current federal government seems slow to learn,” Cross added.
Ottawa’s decision to increase its already high levels of spending and continue budget deficits will hinder the Bank of Canada's (BoC) efforts to control inflation and lead to higher prices for goods and services, according to a new study released by the Fraser Institute.. Bank of Canada .The “Canada's Fiscal Policy Has Undermined Efforts to Tackle Inflation” study was released by the independent and non-partisan public policy think tank on Friday..During the COVID-19 lockdowns in 2020, Justin Trudeau’s federal government, which was already spending at record-high levels, further increased spending while the BoC lowered interest rates to near zero..Those two decisions contributed to higher inflation, which reached a 39-year high of 8.1% in July 2022. According to the latest data available from Statistics Canada, inflation in February remained at 5.2%..To discourage consumer spending and cool price increases, the BoC significantly increased its policy interest rate. However, the federal government continued to increase deficit-financed spending and ran a string of large deficits, including a projected $40.1 billion deficit for 2023-24..The Fraser Institute's study suggests Ottawa's refusal to restrain spending will undermine the BoC's efforts to control inflation, as high government spending and deficits helped trigger today's inflation rate..“Until the federal government shows some spending restraint, Canadians may continue to face higher prices for goods and services,” said Philip Cross, former chief economic analyst at Statistics Canada, senior fellow at the Fraser Institute and author of the study..“Monetary policy and fiscal policy must work together to reduce inflation ... a lesson the current federal government seems slow to learn,” Cross added.
