Recent statements by Bank of Canada officials, including Governor Stephen Poloz and his deputies, indicated the Bank’s discreet (but nevertheless crucial) support for the possible fiscal policy changes that the federal government might enact in the near future.
This according to an economic observer, who pointed out that Deputy Governor Timothy Lane has also been one of the most vocal supporters of Prime Minister Justin Trudeau’s strategy to implement deficits that can give a helping hand to the long-struggling economy.
In the Tuesday (February 9) edition of his column at Canadian Business
, fiscal commentator and CIGI senior fellow Kevin Carmichael said that the statements represent the breaking of a long silence that has persisted throughout the Harper administration.
Carmichael quoted Lane as saying in a February 8 speech: “In such circumstances, fiscal policy may be called upon to provide stimulus, particularly since it is likely to be more effective at low interest rates.”
“Lane’s comments this week leave little doubt that the central bank thinks it could use some help keeping Canada’s economy out of recession,” Carmichael observed.
Trudeau’s commitment to balancing the budget is a major factor in the BoC’s new stance, especially in the context of the nation’s weakened fiscal health due to the global collapse in oil prices.
“Some will say the central bank has no business commenting so explicitly on fiscal policy. I disagree with that, so long as the monetary authority paints with broad strokes. This will help the public assess whether fiscal policy is rooted in contemporary economic thinking or ideology,” Carmichael said.