He’d do it again. And he might still raise interest rates further.That was the message from Bank of Canada Governor Tiff Macklem the day after the federal government’s financial update underscored the pain of high interest rates and high inflation — not just on its own bank balance, but ordinary Canadians as well.Speaking in Saint John, New Brunswick, Mackelm acknowledged the pain as well as the “anger” economic uncertainty is having on the overall mood of the country.But he insisted the present course of action is the only way to avoid a 1970s-style economic meltdown characterized by “ineffective” wage and price controls and labour unrest.“The rising cost of living is making life harder for everyone, especially Canadians who have less to start with. People are working hard, but their salaries don’t buy what they used to. They can’t afford the things they need to live. It feels unfair,” he said. “That feeling of unfairness eats away at the fabric of society.”“I know that even as our interest rate increases are bringing inflation down, to many Canadians they feel like another added cost.”.“No one wins when inflation is high and volatile… because it creates financial pain and social upheaval.”Bank of Canada Governor Tiff Macklem.But, he insisted, the alternative is worse.“The lesson from the 1970s is that fighting inflation half-heartedly and living with the stress, labour strife and uncertainty inflation can cause would be a huge mistake. The right way to respond is with a firm commitment to restoring price stability,” he said, noting that “people felt ripped off.”“No one wins when inflation is high and volatile… because it creates financial pain and social upheaval.”Macklem also took a backhanded dig at rampant government spending as the cause of that “upheaval” — both then and now — which also happened to coincide with a pair of Trudeaus at the purse strings.“The government and central bank weren’t willing to stay the course — to restrain government spending and tighten monetary policy enough to wring inflationary pressures out of the economy,” he said.And that’s exactly what Macklem is aiming to do now. And he said he’s prepared to raise rates even more to force the feds — and Canadians generally — to live within their means.“This tightening of monetary policy is working, and interest rates may now be restrictive enough to get us back to price stability. But if high inflation persists, we are prepared to raise our policy rate further.”.It comes as Finance Minister Chrystia Freeland’s economic statement revealed financing costs on the federal debt have ballooned to about $46.5 billion this year — about 10 cents of every dollar — and will climb to $60.7 billion by 2029.That makes debt servicing costs the biggest single expense in the Canadian budget, ahead of health care and defence. By comparison, Canada spends about $28.9 billion on the military and in fact is looking to cut it by at least $1 billion.“If we do too much, we risk making economic conditions unnecessarily painful for everyone,” Macklem said. “If we do too little, Canadians will continue to endure the harm of inflation and we will likely have to raise interest rates even higher later.”
