The Bank of Canada’s recent rate hikes to tame high inflation will raise borrowing costs for both businesses and consumers, sending shockwaves through the economy, Freeland said. Speaking at an auto industry conference in Windsor, Ont., Freeland said she would be honest with Canadians about roadblocks ahead and the threat of higher unemployment and mortgage rates – developments that could hurt many households. “Our economy will slow down. There will be people whose mortgage rates will go up. Businesses will no longer thrive. Our unemployment rate will no longer be at a record low. This will happen in Canada. This will happen in the U.S. and it will happen in large and small economies around the world,” Freeland said. “There are still some tough days ahead for Canada’s economy. To say otherwise would be misleading.” The Bank of Canada – like other central banks, including the Federal Reserve – has raised interest rates aggressively this year to entrench price stability and achieve its 2% inflation target. There is a long way to go. Statistics Canada reported Wednesday that the Consumer Price Index (CPI) rose 6.9 per cent year-on-year in September — marginally lower than the 7 per cent increase reported the previous month. WATCH: ‘Our economy will slow down’ — Freeland discusses latest inflation numbers
‘Our economy will slow down’ Freeland discusses the latest inflation numbers
Finance Minister Chrystia Freeland warned Canadians that the coming months will not be easy as the government works to slow the economy to fight inflation. With inflation so sticky, economists expect more rate hikes to dampen demand and cool the economy. This could trigger a recession sometime in 2023. While inflation has slowed somewhat in recent months as energy prices have stabilized, Freeland said the government will not be able to help everyone weather the inflationary wave. “We cannot compensate every Canadian for all the costs of inflation due to a global pandemic and Putin’s invasion of Ukraine,” Freeland said. But he promised relief for poorer Canadians who are most vulnerable to sudden increases in the cost of food and rent. Freeland pointed to the passage of Bill C-30, the government’s legislation to temporarily double the GST credit paid to low-income households. Government estimates say this bill will give eligible people without children an extra $234 this year, while couples with two children will get an extra $467 to offset rising costs. Another bill before the House of Commons, C-31, would provide rent relief and send checks to parents to cover the cost of their children’s dental coverage. Freeland said social programs such as Employment Insurance (EI) will be available to help people who lose their jobs in the coming economic turmoil. Conservative Leader Pierre Poilievre has linked inflation to federal government spending in the pandemic era. (Sean Kilpatrick/Canadian Press) Critics, including Conservative Leader Pierre Poilievre, argue that it’s not just pandemic-related supply chain disruptions or a war that has sent inflation soaring at home — that staggering government spending to deal with the pandemic is also to blame. . During question period in the House of Commons on Wednesday, Poilievre said the federal Liberal government’s “half-a-trillion-dollar inflationary deficits” over the past two financial years were to blame for the higher costs. Pointing to planned low-income supports, Poilievre said the prime minister has done “nothing for the vast majority of struggling families”. “Even the small minority that do [receive the supports] it will find it eaten away by higher inflation,” he said, citing a recent RBC Royal Bank report that found the average family would lose $3,000 in purchasing power this year as a result of higher prices and interest rates. He called on the government to scrap planned increases in the federal carbon levy — what Poilievre called a “triple, triple, triple tax” that would drive food prices higher because it would impose additional costs on all parts of the supply chain. Trudeau has defended the climate initiative, saying much of the money collected through the federal carbon tax is shortchanged. He said the Conservatives can’t be trusted with inflation relief because they oppose rent support and dental care for children. In the face of criticism from the Tories, Freeland said the federal government will continue to tighten its belt in the coming months so that Ottawa does not inadvertently drive inflation. “Canadians are cutting costs, and so is our government. That’s our part … to not make inflation worse and more permanent,” he said. Asked later by reporters if the government planned more inflation relief, Freeland said now was the time for fiscal restraint. He said flooding the country with government support — like the emergency benefits sent by Ottawa during the worst of the pandemic — would be “adding fuel to the flames of inflation and just doing the Bank of Canada’s job.” more difficult and inflation will last longer.” With more stimulus money in circulation, there would be more demand for a limited supply of goods and services — which would only push prices higher and spark another inflation battle, Freeland said. “We enjoy a balanced economic path. We act with compassion, but we are very careful that our measures are targeted,” he said. “We want to beat this inflation as quickly as possible.” Freeland said Canada will address a collapsing economy through a “muscular industrial policy” that will encourage companies to invest more in Canada. The government’s latest budget tabled in April included a $15 billion “Canada Growth Fund,” a pool of money to spur growth in low-carbon industries and help the country transition to net zero emissions. The federal government has had some recent success in attracting large foreign investment in some economic sectors, notably electric vehicle manufacturing and critical mineral mining. Freeland said she wants to see more of that. “We have a historic opportunity right in front of us to build an economy that will deliver great jobs and prosperity for generations to come,” Freeland said.
