Former central bank’s governor doesn’t think economic stimulus has led to Canada’s inflation hike

According to former central bank’s governor Stephen Poloz, government spending and stimulus haven’t caused today’s sharp inflation growth.

“I don’t think it’s true,” – he said during a recent interview on CTV. “Moreover, the stimulus actually kept the national economy from falling into a deep hole in which we would have faced a significant deflation.”

The recent report by Statistics Canada shows that inflation rose to 4.7% last month. The Bank of Canada expects it to reach its peak at the end of 2021 and to start going down in the second half of the next year.

“We need to understand that policy stimulus was chosen in the right time. It was well intended and it helped Canada’s economy avoid all the worst calls that people were making,” – he explained.

The average inflation among countries of the Organization for Economic Co-operation and Development is 4.3% right now. However, according to Poilievre, it’s a global problem, as other central banks are using a similar approach on fiscal stimulus.

“In my opinion, those countries did the best job of assessing the downside risk that everybody was facing,” – said Poloz. “Read a few books on the Great Depression in the 1930s and you’ll see what we’ve managed to avoid.”

In his opinion, although governments can try to solve the affordability issue in the short-term, any government policy usually takes 1-2 years to have any influence on inflation.

Nevertheless, Poloz believes housing inflation will keep growing, and federal governments are able to address this issue today.

“They can gather all the levels of government and set a list of measures that they can take in order to increase supply of housing,” – he added.

 

Leave a Reply

Your email address will not be published.