Despite inflation being “excessively high” and exacerbated by external factors such as the war in Ukraine, Canada’s finance minister says the economy can withstand the pressures and avoid a crash, according to Bloomberg.
“Inflation is definitely up and I would say that’s our biggest concern right now,” Canadian Finance Minister Chrystia Freeland told Bloomberg TV’s Haslinda Amin on the sidelines of the Group of 20 finance chiefs meeting in Bali of Indonesia. “The Bank of Canada has acted aggressively and I think it’s perfectly reasonable to hope for a soft landing.”
The Bank of Canada’s recent 100-basis-point hike in interest rates sparked expectations that the U.S. Federal Reserve could equalize the increase later this month and trigger a new storm of global tightening that threatens to destabilize markets. Freeland said the government “really respects the independence” of the central bank and that monetary and fiscal policy are working in tandem in Canada to contain inflation, which accelerated to a four-decade high in May.
The monetary authority has the “mandate, the tools and the will” to reduce inflation and the fundamentals of the Canadian economy are “very strong,” including unprecedentedly low unemployment levels, abundant natural resource and agricultural production, he said.
Asked if the government bears some responsibility for inflation in light of Covid-era spending, Freeland argued that Canada’s debt remains lower than many of its developed counterparts. “Now is the time to have a real eye on fiscal responsibility, and that’s what we’re doing,” he said.
Concerned early in the pandemic about a potential “lost generation” of idle workers and businesses, fiscal authorities spent a lot of money “to get Canadians through the pandemic and prevent financial scarring,” he said. “I feel very, very confident that we did the right thing and that it worked.”
Tax problems
As Freeland gathered among G-20 counterparts for the second and final official day of meetings, a global initiative on the agenda faced another obstacle coming from Washington. The OECD-led US-led global tax deal struck last year between nearly 140 countries has hit another wall as the US Congress delayed a crucial vote on its implementation.
With the top economy’s vote on the deal pending, some governments have begun to question whether they should delay their own implementation to avoid being disadvantaged by the uneven application of the global minimum corporate tax rate.
Freeland said of the deal that there is “more work to be done” but that she believes in “positive intent” and that Canada remains committed to doing its part.
“It’s really very important, and I think it’s also important now, at a time when the whole idea of multilateralism is facing a lot of challenges,” he said, calling the deal “huge and transformative.”
Source: Capital
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