Evidence of meeting #12 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
Senior Deputy Governor, Bank of Canada
It doesn't affect the accounting treatment.
Bloc
Governor, Bank of Canada
You have to ask Statistics Canada that question. That's the body that categorizes national accounts. That's not us.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I understand your discomfort, because I feel the same way. I'm going to ask you a second question.
Somewhere in your report, you say that when the Trans Mountain project is completed, there won't be much investment in Canada. Investment in oil transportation infrastructure will be down a bit.
Does that mean private sector investors, especially those from abroad, will no longer want to do that work themselves?
Should we be concerned that the government will have to pick up the slack or choose to pick up the slack, and that taxpayers will end up funding those investments?
Governor, Bank of Canada
It's really up to you, as parliamentarians, to make that decision.
That said, the Trans Mountain Expansion Project, or TMX, had a macroeconomic impact, as did the new LNG Canada terminal in British Columbia. The latter is large enough that we'll see a difference in national accounts when it opens.
These major projects certainly do have quite an impact macroeconomically.
Liberal
The Chair Liberal Karina Gould
Thank you, gentlemen.
We're going to continue with Mr. McLean for five minutes please.
Conservative
Greg McLean Conservative Calgary Centre, AB
Thank you, Madam Chair.
Welcome, Governor and Deputy Governor.
You have a currency management program, including buying foreign currencies at the bank. Right now, you have about $71-plus billion of U.S. currency on your balance sheet. That's a record high. Is that correct?
Governor, Bank of Canada
It's roughly right. I don't have the actual number in front of me, but just to be clear, those assets in our exchange fund account belong to the Government of Canada. We manage those on their behalf.
Conservative
Greg McLean Conservative Calgary Centre, AB
Thank you.
In January 2025, you had $63 billion, so you've gone significantly up, as far as your holdings of U.S. dollars goes. When you purchase U.S. dollars, what effect does it have on the Canadian dollar to U.S. dollar exchange rate?
Governor, Bank of Canada
It doesn't really have any effect. We run a matched book. The government typically issues a bond to fund the purchases of the U.S. dollars, so it doesn't really have any effect. You have to realize that the exchange market is a vast, very liquid market. These transactions are not of a scale that would impact it.
Conservative
Greg McLean Conservative Calgary Centre, AB
Thank you.
For correlation, though—and I know correlation and causation are two different things—every time the Bank of Canada reduces its holdings of U.S. dollars, the exchange rate changes and goes down. Is this just coincidental?
Governor, Bank of Canada
We have not intervened in the foreign exchange markets since, I believe, 1998. These are funds that are held in the case of an emergency—
Conservative
Greg McLean Conservative Calgary Centre, AB
It's at a higher level now than it has been in the past, though.
Governor, Bank of Canada
The global economies have been growing. Our economy has been growing. It's been growing—
Conservative
Governor, Bank of Canada
That's a good thing. You want to have some emergency funds.
Conservative
Greg McLean Conservative Calgary Centre, AB
Thank you.
Stephen Miran was appointed to the Fed. He made a statement that countries like Canada manipulate their exchange rates in order to keep the U.S. dollar down to increase manufacturing in their home countries, and he calls it dollar manipulation.
Would you say the Bank of Canada is involved in any kind of dollar manipulation?
Governor, Bank of Canada
It is absolutely not. We have not intervened in our exchange market since 1998. We only intervened in 1998 because there was extreme pressure on our currency. We were stabilizing it. We believe in a free-floating exchange rate. Canada actually has been a model around the world for a long time. We're big believers in flexible exchange rates. We think they're broadly a stabilizer.
Conservative
Greg McLean Conservative Calgary Centre, AB
Right now, the Bank of Canada rate is 2.25%, and the Fed rate is 3.75% to 4%.
In our history, how often is that differential that wide?
Governor, Bank of Canada
The differential is unusually wide at the moment, and that's because the performance of our economy is unusually wide at the moment.
Conservative
Greg McLean Conservative Calgary Centre, AB
Are you saying that the performance of our economy is quite subpar at this point?
Governor, Bank of Canada
It's certainly a lot weaker than the U.S. economy, yes.