Skip to main content

Bank of Canada Governor Tiff Macklem during a news conference, April 13, in Ottawa.Adrian Wyld/The Canadian Press

Prime Minister Justin Trudeau said Conservative leadership candidate Pierre Poilievre either misunderstood or doesn’t care about the Bank of Canada’s independence, after the Ontario MP said that if he forms government, he would fire Governor Tiff Macklem.

Mr. Poilievre made the comments at Wednesday night’s leadership debate in Edmonton. They marked a significant escalation in his attacks on the central bank, which he has accused of failing to manage inflation, now at a three-decade high and well above the bank’s 2-per-cent target.

Mr. Trudeau and Conservative leadership candidates criticized Mr. Poilievre on Thursday for jeopardizing the Bank of Canada’s independence.

The Prime Minister called the convention that separates the bank from politics “a really important principle” that ensures Canada’s economic stability.

That a “leading candidate” to helm the Conservative Party, and by default become the leader of the official opposition, “seems to profoundly – either misunderstand that or not care about the facts at all – is somewhat disappointing,” Mr. Trudeau said.

Preston Manning voices concern over divisive tone of Conservative leadership race

Pierre Poilievre fans frustration about Canada’s inflation woes

The Bank of Canada has come under fire in recent months over rising inflation that has eroded the purchasing power of wages and savings.

After holding interest rates near zero through much of the pandemic, the bank began raising them in March in an effort to cool Canada’s overheating economy and bring down inflation. However, many analysts have argued that the bank waited too long to begin monetary-policy tightening, undermining its credibility as an inflation fighter.

Mr. Macklem has acknowledged that the bank made mistakes in the past year. “We got a lot of things right, we got some things wrong. We are responding,” he told a parliamentary committee.

Mr. Poilievre was accused by his leadership opponents, after Wednesday’s comments, of politically interfering with the bank. The central bank is designed to operate outside of the political fray in order to set interest rates and manage inflation without fear of voter backlash or influence from elected officials.

On Thursday, leadership rival and Brampton Mayor Patrick Brown accused Mr. Poilievre of political interference and criticized the long-time MP’s promotion of cryptocurrencies as an alternative to the Canadian dollar. Mr. Brown said Mr. Poilievre is proposing the “risky” agenda because he “outrageously believes it will somehow allow people to opt out of inflation.”

Fellow candidate Scott Aitchison said Mr. Poilievre’s comments were “irresponsible” and showed a lack of leadership, and Jean Charest said firing Mr. Macklem would be “dangerous and intellectually dishonest.”

“Serious problems need serious solutions, not sound bites,” he said.

The central bank said Thursday that it won’t comment on political debates, but it did underscore Mr. Macklem’s seven-year appointment in a brief statement. “His term runs until June, 2027,” spokesperson Paul Badertscher said.

Mr. Poilievre has criticized the bank repeatedly in the past year, arguing that rapidly rising consumer prices are largely the result of the central bank buying hundreds of billions of dollars in federal government bonds during the pandemic – a program known as quantitative easing that was aimed at lowering long-term interest rates. The central bank, and most professional economists, disagree with Mr. Poilievre’s assessment.

On Thursday, he was undeterred by the cross-partisan criticism. He repeated his accusation that the Prime Minister has used the central bank as an “ATM to finance his out-of-control deficits” and noted that inflation is well outside the range of 1 to 3 per cent. The annual rate of growth for the consumer price index hit 6.7 per cent in March.

“If anyone in any other job had this kind of record of failure, they would be fired,” Mr. Poilievre said about Mr. Macklem.

Conservative finance critic Ed Fast, who is backing Mr. Charest, urged Mr. Poilievre to reconsider his position.

“The central bank has served Canadians well, for a very long time. Tiff Macklem himself admitted that they got some things wrong. There’s no government in the world that got everything right with COVID,” Mr. Fast said.

Central bank independence has been a cornerstone of Canada’s economic and financial system for decades. This was codified in the early 1990s, when the government gave the Bank of Canada an inflation target and then largely left it alone to achieve the target. The idea is that politicians often make for poor guardians of the Canadian dollar: keeping inflation under control sometimes requires slowing down the economy and letting unemployment rise – a choice a politician would be loath to make.

The government, however, does set the high-level goals of monetary policy every five years when it renews the bank’s inflation-targeting mandate, which happened most recently in December. The everyday management of monetary policy – decisions about interest rates and currency in circulation – is then left up to the governor and governing council.

The Minister of Finance has the power to direct a central bank governor in the event of a major disagreement about monetary policy. The power has never been used. The government is required to publish the directive, which most analysts believe would result in the immediate resignation of the governor and trigger a political crisis.

Kevin Milligan, with the University of British Columbia’s Vancouver School of Economics said that while it’s fair for politicians to have opinions about monetary-policy goals and assess the bank’s leadership against those goals, it’s not fair to do so over short time horizons. The longer-term nature of their work helps explain the seven-year term for the governor, he said in an e-mail.

“I hope that anyone with criticisms of the current monetary-policy framework has a clear alternative to propose,” Prof. Milligan said.

“When voters make their choices in a future election, they should know whether they will be getting a monetary policy based on cryptocurrency, the gold standard, or 1970s-style money-supply targeting.”

With reports from Ian Bailey and Bill Curry in Ottawa.

For subscribers: Get exclusive political news and analysis by signing up for the Politics Briefing.