“I am confident that the Bank of Canada remains independent,” Macklem said to reporters in Calgary.
“We have a clear mandate. Canadians expect us to control inflation, and that’s what we’re doing.”
Macklem’s comments came a day after the Bank of Canada opted to hold its benchmark interest rate steady.
Chrystia Freeland, Canada’s deputy prime minister and finance minister, called that decision a “welcome relief” for Canadians feeling the pinch of higher interest rates on their mortgages.
BOC’s decision to hold interest rate at 5% is ‘welcome relief’ for Canadians: Freeland
Before the decision, three premiers wrote to the Bank of Canada asking the institution to not raise interest rates any higher to avoid further pain on Canadians.
The Bank of Canada is an independent institution tasked with setting monetary policy for the country; it receives its inflation targeting mandate from the federal government but sets interest rates and otherwise operates autonomously.
Some in the Canadian economic landscape took umbrage with Freeland and the premiers’ comments.
Derek Holt, vice-president and head of Capital Markets Economics at Scotiabank, said in a note on Wednesday that the political commentary was “unhelpful.” He said that Freeland’s statement saying she would work “to ensure that interest rates can come down as soon as possible” was “not the domain of a finance minister.”
Holt argued that such commentary could undermine global opinions of the Canadian financial system if observers started to believe that the central bank was subject to political interference.
Macklem was asked Thursday after a speech to Calgary’s Chamber of Commerce whether he felt Freeland’s comments were appropriate.
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He said that he understood elected officials are hearing from Canadians about the pain high inflation and higher interest rates have inflicted on their constituents, and acknowledged that rate hikes to date have “squeezed” some households.
But Macklem also said the Bank of Canada’s operational independence is “more important when the decisions are difficult.”
“Unfortunately, there is no pain-free way to restore price stability,” he said, backing the Bank’s monetary policy decisions to date.
Macklem added that Freeland has “been very clear that she fully respects the independence of the Bank of Canada.”
This is not the first time the Bank of Canada has found itself the subject of political debates.
Pierre Poilievre made headlines last year when he was campaigning for the Conservative party leadership by saying he would fire the Bank of Canada governor if he were prime minister. NDP Leader Jagmeet Singh has also called for changes to the central bank’s mandate to consider a dual focus on employment.
Both Poilievre and Singh have attacked Liberal government’s economic stewardship in recent months for putting the Bank of Canada in position to raise interest rates in the first place.
Bank of Canada may need to raise interest rates again despite this week’s hold: Macklem
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