Public Accounts Committee on May 7th, 2024

[Carolyn Rogers]

I think the best way for me to answer your question, Mr. Chair, is to say something that the governor and I have both said publicly before, which is we didn't get everything perfect. We didn't make every decision perfectly. We did not have perfect foresight. We were dealing with the same high level of uncertainty that all Canadians were facing at the time.

We took the best judgments in the interest of Canadians that we could with the amount of information that we had at the time. We did our job, which is to implement the policy that we judge to be the best to guide the Canadian economy in the long term.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Sorbara, you have the last five minutes, please.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Thank you to everyone this afternoon. It's great to be back on public accounts. I was here a couple of years ago, and I very much enjoyed it and look forward to picking it up again.

Deputy Governor, I take it that the Bank of Canada is solely responsible for monetary policy, not fiscal policy. Is that correct?

[Carolyn Rogers]

That's correct.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I wanted to put that on record.

Second, just to get something else on record, earlier this afternoon I had a chance to speak on the budget implementation act and the governor's comments when he presented at the House of Commons Standing Committee on Finance on May 2 with regard to the forecast and so forth.

I'll just read two lines. I want to make sure I have this correct. It says, “The second is that growth in the economy looks to be picking up. We expect GDP growth to be solid this year and to strengthen further in 2026.”

That is from the statement that the Bank of Canada governor made. I would confirm that with you.

[Carolyn Rogers]

That sounds accurate.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

He states:

Overall, we forecast GDP growth in Canada of 1.5% this year and about 2% in 2025 and 2026. The strengthening economy will gradually absorb excess supply through 2025 and into 2026.

Deputy Governor, I tend to think of the world in the last thousand days in terms of what we've gone through and then look forward to the next 100 or 200 days, wherever you want to take it.

One comment is that we are seeing inflation go in the correct direction. Expectations are anchoring on both the consumer and business sides. Would you not concur with that?

[Carolyn Rogers]

We have seen inflation expectations in the business sector stay fairly anchored. They are still, in our view, a little bit elevated in the consumer sector, but they're coming down, yes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

I do very much enjoy reading the three public account books, in a weird way.

From the public accounts and the losses that are recorded, is there not a certain aspect of—if I remember my accounting correctly—unrealized gains and unrealized losses from holding securities? If you hold those securities to maturity or when rates revert to the mean, then they're reversed. Is that not correct?

[Carolyn Rogers]

Yes.

I think it was Mrs. Shanahan who asked earlier about the indemnity, and the indemnity is exactly that: It indemnifies the bank against change in the fair market value of our investment portfolio. That is not a realized loss. It would not move into the category of our income statement and our losses unless we disposed of those assets, unless we sold the assets, which is not our plan.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Exactly.

I'm going back to my banking days.

Thinking about what happened in the United States a few months ago with some of the smaller or the mid-sized banks or in terms of any financial system, even going back to the financial crisis, if you hold assets that may have been marked down in value, you are forced to sell and you end up in a liquidity situation. That is not a situation with a central bank. That's not the situation at all.

[Carolyn Rogers]

That's correct.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

For my edification, I'll ask this. Our public accounts are not financed in terms of the way the bank executes monetary policy. Do you care to comment on that, please?

[Carolyn Rogers]

I'm sorry, I don't.... Can you...?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

It's in terms of the monetary transmission index.

[Carolyn Rogers]

I'm sorry; I'm also having trouble hearing you.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I'm sorry; it's in terms of using the Bank of Canada rates, overnight rates, and obviously the posted rates.

[Carolyn Rogers]

It's about how monetary policy works. Okay. I'm sorry.

Our policy rate sets the overnight rate, and the overnight rate is the rate to which other interest rates are anchored. Really, we set a baseline interest rate that transmits into the rate that people pay for business loans, mortgages and other forms of debt.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

How much time do I have, Chair?

[The Chair, Conservative, John Williamson]

You have 20 seconds.

I've been pausing the clock whenever the question is restated to give everyone fair time.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair. That is very kind of you.

I will go back to the inflationary front. We have seen a marked decrease, I would say. Where are the shelter component and rent component tracking? Are they tracking to the bank's expectations, or are they still sticky?

[Carolyn Rogers]

It's still sticky and it's still elevated. It is a big contributor to the above-target inflation right now. That's one of the reasons we look at a variety of measures. We're particularly focused on core measures, because they trim out the things that are outliers, including in shelter inflation right now. It is still contributing and it's still a reality for Canadians.

[The Chair, Conservative, John Williamson]

That is your time. Thank you very much.

Thank you, Ms. Rogers.

Thank you very much, Ms. Rogers, Ms. Bulhoes, Ms. Dancey and Mr. Moreau.

We appreciate your all coming in and participating. Any information that you've promised us can be submitted to the analyst.

If you still have questions, please consult the clerk.

We'll suspend for five minutes to allow the witnesses to leave and for us to go in camera, and then we'll come back here. If any members are online—this is you, Mr. Desjarlais—sign out and then come back into Zoom, please.

Thank you very much. This meeting is suspended for five minutes.

[Proceedings continue in camera]