The former governor of the Bank of Canada said Canada was headed for recession when he testified before a Senate committee on Sept. 22, while criticizing the central bank’s message about inflation.
David Dodge, who resigned in 2008, told the Banking Commission that economic growth would be zero and “unemployment would go up.” according to To BlackRock Reporter.
The chairman of the committee, Senator Pamela Wallin, tried to get an explanation from Dodge.
“You refrained from using the word ‘recession’, but let me ask you about it,” she said.
“After a recent 3% annualized growth rate, it wouldn’t feel very good to have zero growth,” Dodge replied.
“Putting the numbers on it, I think zero for that period is a good guess, but I think ‘guess’ is the valid word.”
Current Bank of Canada (BoC) Deputy Governor Paul Baudry gave a lecture at the University of Waterloo on Sept. 20 and was asked by a student whether higher interest rates would lead to a recession. He replied, “Sure it’s too early to call.”
Other central bankers are also wary of using the word “recession.”
Federal Reserve Chairman Jerome Powell said on Sept. 21, after raising interest rates by 0.75 percentage points for three consecutive rate hikes, he said: “If this process will lead to a recession, or if “No one knows how severe the recession will be,” he said. .
Central bank forecasts for the current inflation race have fallen short of target, with some central banks saying inflation is subdued or simply ‘temporary’.
Senator Clément Guignac, former chief economist of the National Bank, criticized the central bank official’s message.
“In 2020, not only Canada but also the central bank said interest rates will stay low for some time,” Guignac said.
“In 2020, the Bank of Canada said, ‘Did you know? Inflation is temporary. Whoa,'” Gignac said. “They give the impression that they know more than we do, and we’re beginning to realize that there are no better clues than Wall Street economists.”
A central bank’s main mission is to keep inflation in check.
“In August 2020 they changed the rules and basically said, ‘I don’t care about inflation,'” Dodge told the commission.
Former Deputy Finance Minister Dodge said it was “disappointing” that the BoC had used the word “temporary” to describe inflation, saying economists could understand it but “in plain English, it didn’t help much.” He said.
“So I think there was a big mistake,” he said.
The federal government has often blamed inflation for global affairs and supply chain problems, and has defended using financial aid programs to compensate for state-imposed lockdown measures.
“We are facing global headwinds in dealing with inflation,” Liberal Democrat leader Mark Holland said on Sept. 20.
Not all countries have experienced the same level of inflation, but those that have applied similar monetary and monetary policies to Canada are in a similar situation.
Deputy Governor Beaudry acknowledged this week that earlier pullbacks by the BoC would have kept inflation down.
“If the global[stimulus]withdrawal process had been somewhat faster, all countries would likely have done better,” he said.
Conservative Party leader Pierre Polivre commented on the allegations. Twitter post September 21st.
“The Bank of Canada said that I [years]: Excessive spending and cash creation exacerbated today’s inflation. Now we pay the price: higher costs and interest rates. “