Thank you.
I would like to thank the honourable member for that. I was a little worried about that language, so I appreciate the chance to withdraw it here.
Instead, inflation soared to its highest rate in over three decades in 2022 and remains so stubbornly entrenched that the Bank of Canada has had to continue raising interest rates.
Rates have had to rise sharply in large part because governments have relied on monetary policy alone to fight inflation. Even Paul Volcker, legendary head of the Federal Reserve Board credited with single-handedly slaying the inflation dragon in the 1980s, acknowledged that monetary policy by itself was not enough. Back then, lowering inflation required a co-ordinated effort to reduce regulations, which helped unleash potential growth, as well as a commitment from president Ronald Reagan to shrink government’s footprint in the economy—two examples of how less government [not more] helped lower inflation.
Today’s high inflation, and consequently higher interest rates, will persist until monetary and fiscal policy together rein them in.
I will clarify some of Mr. Cross's comments there. What we have to think about is that inflation actually has two sides to the ledger. On one side you have monetary policy, which is the amount of money that is printed and put into the economy. There are fancy ways of doing that through quantitative easing, which is basically the government buying back its own bonds. The result is that you're injecting more and more cash into the system. It's a fancy, sophisticated way of doing it, but in many ways the effect is the same as just pressing turbo on the printing press.
The other part of the ledger is supply, which is the amount of goods and services that are produced in an economy. If these were to hold equal, you'd get minimal inflation, likely within the target range. If, in fact, the money supply goes up, then likely you're going to get inflation. If, at the same time your money supply goes up, your real economy declines—in other words, your ability to produce goods and services—then you have a good chance of getting very high rates of inflation.
In a nutshell, what happened was actually eminently predictable. The leader of the official opposition, Pierre Poilievre, called it. He called that we were going to get inflation.