Today’s BoC pause is more data-dependent than the one in March: C D Howe’s Jeremy Kronick
Canadian politicians welcomed the Bank of Canada’s decision to hold interest rates, though one economist was skeptical that calls for a rate pause from a handful of premiers across the political spectrum had a real impact on the policy move.
On Wednesday, the Bank of Canada Governor held its benchmark rate at five per cent, as the bank works towards its goal of bringing inflation down to two per cent.
The rate hold, which was in line with most economists’ expectations, came after premiers of three provinces made the unusual decision to call for a pause to interest rate hikes, which they argued has been putting a squeeze on their constituents.
Newfoundland and Labrador Premier Andrew Furey was the third Canadian premier to call for a rate pause, following similar appeals Ontario’s Doug Ford and B.C.’s David Eby – the three politicians representing Liberal, Progressive Conservative and New Democratic governments, respectively.
Furey issued a letter on Tuesday citing the “negative impacts continued interest rate increases are having on Canadians.”
Speaking to reporters following the Bank of Canada announcement, Furey called the hold “great news for Newfoundlanders and Labradorians.”
“On the balance of the day-to-day impacts and rightfully pursuing escalating inflation rates, this is the right move in my opinion right now and I applaud the Bank of Canada for their decision,” he said.
Ford, who had also written to Macklem to ask for a rate pause, called the announcement from the central bank “good” in a Tweet posted Wednesday. Earlier in the week, Ford he had written to Macklem highlighting the “devastating impact” rate hikes have had on people.
Federal Finance Minister Chrystia Freeland also weighed in on Wednesday, calling the pause “welcome relief.”
“As the Bank continues this work, my number one priority is to use all the tools at my disposal and to work with partners at other levels of government across Canada, to ensure that interest rates can come down as soon as possible,” Freeland wrote in a statement.
BNNBloomberg.ca has reached out to Eby’s office for comment. The B.C. premier was the first to ask the central bank to hold rates last week, saying that people in his province were “already hurting.”
David Doyle, head of economics Macquarie, said he doesn’t believe political pressure on the Bank of Canada impacted its policy decision.
“It doesn’t surprise me to see the political theatre take place. I think that politicians are inclined to grandstand in that way,” he told BNN Bloomberg in a television interview on Wednesday.
“The Bank of Canada remains independent. I don’t think what the premiers or the finance minister are saying will have much effect at all what Governor (Tiff) Macklem is inclined to do.”
With files from Bloomberg News