Leaders See Little Need for Change to Bank of Canada Mandate

  • Central bank's 5-year mandate coming up for review in 2016
  • Liberal Leader Trudeau says federal government leaning on BoC

The Bank of Canada’s inflation-targeting regime is working well and doesn’t need major changes when it comes up for renewal next year, the two leading candidates in the country’s election campaign said Monday.

Canada’s central bank operates monetary policy under a mandate from the federal government to keep inflation at around 2 percent, and that five-year agreement -- which influences everything from the cost of mortgages to the value of the Canadian dollar -- is set for review in 2016. There is some debate among economists over whether Canada should strive for higher rates of inflation -- in part by keeping interest rates lower for longer -- in a bid to combat stagnant growth rates.

“I can tell you with some certainty that we would not be looking at a substantial change in that mandate,” Prime Minister Stephen Harper told reporters in Toronto Tuesday.

Researchers at the central bank are looking into whether 2 percent is the most appropriate number, Governor Stephen Poloz said Monday in Washington, adding there’s a “high bar” for any change. The bank is also focused on incorporating lessons learned from the financial crisis as it prepares for the review, he said.

Liberal Party Leader Justin Trudeau, who polls suggest could become Canada’s next prime minister, said the central bank’s inflation target of “2 percent seems like it’s worked very well in the past. So we will of course continue to engage in a responsible way going forward.” Trudeau said the nation’s central bank should remain free from politics and independent to pursue its inflation targets.

“One of the things I think we’ve seen that has been deplorable over the past month is a willingness by the federal government to engage in a more active way with the Bank of Canada, and lean on it and use it to bolster political arguments,” Trudeau told reporters Tuesday during a campaign stop in Toronto.

Harper denied the accusation. “I don’t know what the basis of that accusation would be. The Bank of Canada continues to function as it always has, and we have great confidence in the Governor and in the Bank of Canada’s monetary policy,” he said.

Voters will head to the polls on Oct. 19 in Canada’s 42nd election. Trudeau’s Liberals lead with 35.7 percent support nationally, according to daily tracking poll results released by Nanos Research on Monday. Harper’s Conservatives are in second at 28.9 percent and the New Democratic Party, led by Tom Mulcair, trails at 24.3 percent.

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