The Bank of Canada will need to maintain its independence to aid the economy during and after the COVID-19 pandemic, particularly as the countryB次元官网网址檚 debt levels rise, says the bankB次元官网网址檚 second-in-command.
In a speech on Monday, senior deputy governor Carolyn Wilkins detailed how the bankB次元官网网址檚 actions through the pandemic have been aimed at ensuring businesses and individuals can access lines of credit and short-term loans, and spur demand during an expected recovery through low interest rates.
The bankB次元官网网址檚 balance sheet has more than tripled from around $120 billion in early March before the shutdown, to around $385 billion as of last week as it purchases more federal and provincial bonds, effectively providing low-cost loans to finance government stimulus that federally stands at roughly $146 billion.
Wilkins said the financial risk to taxpayers is low because of restrictions around the bond purchase programs.
The country will be left with more public and private debt than before the pandemic forced a freeze on economic activity, she said.
B次元官网网址淲hether itB次元官网网址檚 a risk of inflation or deflation, central bank credibility is critical,B次元官网网址� she said in the text of her speech posted online by the bank.
B次元官网网址淭his requires keeping our eye on the ball in terms of our mandate and retaining the operational independence to achieve it.B次元官网网址�
The question of keeping the bank free of political influence faced Finance Minister Bill Morneau last week when he unveiled the next governor, Tiff Macklem.
The Liberals and central bank have an B次元官网网址渆ffectively working relationship,B次元官网网址� Morneau said at the Friday press conference, adding the Liberals saw B次元官网网址漷he independence of the Bank of Canada as criticalB次元官网网址� to the future of the economy.
Wilkins was considered a top candidate to replace outgoing governor Stephen Poloz, just as Macklem had been the favourite seven years ago when he was the bankB次元官网网址檚 No. 2 and Poloz got the top job.
READ MORE:
The choice to appoint Macklem received praise in some quarters: private sector economists spoke highly of his skills and environment groups saw promise in his interest in the effects of climate change on the economy.
B次元官网网址淐anada needed to move climate change to the front of the financial line, and with Tiff as incoming governor that need has been met,B次元官网网址� said Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo.
But there was criticism as well, including from some womenB次元官网网址檚 groups who questioned why Prime Minister Justin TrudeauB次元官网网址檚 government didnB次元官网网址檛 appoint Wilkins to head an institution that has never had a female governor.
B次元官网网址淲e made the determination on who would be the best to see us through this difficult time and seven years into the future as well, and I know that Tiff Macklem will do just that,B次元官网网址� Trudeau said Monday outside his Ottawa residence.
The bank estimates that pandemic-related restrictions, which have closed non-essential businesses and led to more than seven million workers receiving federal aid, will result in a 15 to 30 per cent drop in gross domestic product for the second quarter from its level in late 2019.
Wilkins said the bank hasnB次元官网网址檛 published a full forecast because of the uncertainty about when restrictions will be lifted. There could also be other head winds slowing a recovery, she said, citing low oil prices.
B次元官网网址淏ut even in a good scenario, lost output will be made up only gradually as containment measures are lifted, people return to work and production ramps up,B次元官网网址� she said.
That level of uncertainty is why the Liberals have yet to introduce a budget, Trudeau said.
The government had pledged to introduce the spending blueprint at the end of March, but scuttled plans after MPs agreed to put the House of Commons on an extended hiatus as the pandemic took hold.
Trudeau said the Liberals are looking at when to present a budget or an economic update.
B次元官网网址� With files from Mia Rabson
Jordan Press, The Canadian Press
Like us on and follow us on .
