Evidence of meeting #112 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spending.
A video is available from Parliament.
3:45 p.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Fair enough. We've heard that for the third time.
3:45 p.m.
Liberal
The Chair Liberal Peter Fonseca
MP Hallan, please allow the governor to finish his answers to your questions—
3:45 p.m.
Conservative
Andrew Scheer Conservative Regina—Qu'Appelle, SK
Mr. Chair, on a point of order, my understanding is that at these committees, because we have such limited time, the witnesses are encouraged to use a similar length of time in responding to the question as it takes to pose the question.
Mr. Hallan is asking yes-or-no questions. I think it's fair, if my colleague is trying to focus in on getting an actual—
3:45 p.m.
Liberal
The Chair Liberal Peter Fonseca
That is not correct, MP Scheer. What you're saying is not correct. The governor should have an opportunity to answer the question.
3:45 p.m.
Governor, Bank of Canada
I'm not going to have yes-or-no answers when you get down to specific questions of fiscal policy.
3:45 p.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Okay, but with all due respect, you said that you did your projections based on current government projections.
3:45 p.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
We know that it's already $6 billion over, according to the PBO. Is that helpful in your bringing down the interest rate, yes or no?
3:45 p.m.
Governor, Bank of Canada
I think I've answered that question. I can't really add any more than what I've already said.
3:45 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
That's your time, MP Hallan. Now we go to MP Dzerowicz, please—
3:45 p.m.
Conservative
3:45 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
On a point of order, Mr. Chair, I was timing the whole thing and I had a full other minute left.
3:45 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
You weren't stopping for the points of order.
3:45 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Mr. Chair, there's another minute. Let's replay the tape.
3:45 p.m.
Liberal
The Chair Liberal Peter Fonseca
The chair has said that this was the time.
Now we have MP Dzerowicz.
3:45 p.m.
Conservative
3:45 p.m.
Liberal
The Chair Liberal Peter Fonseca
There's a challenge to the ruling of the chair.
(Ruling of the chair sustained: yeas 7; nays 4)
Thank you. It's sustained.
Now we go to MP Dzerowicz for six minutes, please.
3:45 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you so much, Mr. Chair.
I want to thank the governor and the deputy governor for being with us today.
Thanks to both of you for your extraordinary work, particularly during these very unprecedented and very difficult times.
I want to start off by just getting you to clarify very quickly, Governor. You had indicated in a question to my colleague across the way.... You said something along the lines that all levels of government spending plans could result in fiscal policy being out of touch with monetary policy.
Did I hear you correctly, and can you clarify that you're speaking of more than just the federal government spending? If you could clarify that for us, that would be great.
3:45 p.m.
Governor, Bank of Canada
I am talking about all levels of government, both federal and provincial. I don't think I used the words “out of touch”.
3:45 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Okay. Thank you for that.
We had a peak of inflation a little while back at 8.1%, and today the inflation rate is 3.8%. No one would say that our inflation rate isn't too high. It is, but can you tell us to what you can attribute this improvement in the situation around inflation, please?
3:45 p.m.
Governor, Bank of Canada
I think there are two sets of factors.
Part of it is global. One of the reasons that inflation went so high was that, globally, demand for goods ran way ahead of the ability of the economies to supply them, so you saw a big run-up in prices of goods globally. Then, of course, Russia's attack of Ukraine drove energy prices and agricultural prices a lot higher.
The global supply chain issues that were clogging up the system have largely been resolved. Of course, Russia's invasion continues, and we now have a new conflict in the Middle East that is creating uncertainty, but energy prices have come down from their peak at the start of the war. Agricultural prices have come down. Those things have relieved inflationary pressures globally.
The other part, though, is more domestic, and that's really where monetary policy works and matters. When the economy reopened, what happened was that demand recovered much more quickly than supply could recover, and that resulted in demand running ahead of supply. The economy was very overheated, and that created domestic inflationary pressures.
We responded forcefully. We raised interest rates faster than we've ever raised them. What we see now is that those higher interest rates are working through the economy. Growth in the economy has cooled. The economy was very overheated. Most indicators suggest that it is now close to balanced. That is relieving those inflationary pressures. You have seen inflation, for both those global and domestic reasons, come down considerably.
We think growth is going to be weak for the next few quarters, and what that means is we think there's more inflation relief in the pipeline, and that's something we're certainly looking for.