Amid news that inflation in Canada rose to 3.3 percent in June, Finance Minister Chrystia Freeland attempted to alleviate fears by highlighting the “underlying strength of the Canadian economy.”
“Inflation is coming down, jobs are being created, and the Canadian economy is strong and resilient,” the deputy prime minister said during a press conference in Alberta on Aug. 15.
“Our economic plan is fiscally responsible, and it’s working. And that’s really important as we deliver major investments to build Canada’s clean economy and create great middle-class careers for people.”
The uptick in price growth in Canada came after inflation fell to 2.8 percent in June, which was within the Bank of Canada’s (BoC) target range of 3 percent for the first time since March 2021. Inflation rose again due to gasoline prices falling by less than they did in June, according to Statistics Canada.
On July 12, the BoC raised its policy rate to 5 percent, which was the second rate hike after a five-month pause.
Following the inflation announcement, Derek Holt, Scotiabank vice president and head of Capital Markets Economics, wrote that the BoC would need to keep hiking interest rates or risk “losing the fight” to inflation.
In reaction to the news, Ms. Freeland acknowledged there had been “real challenges” in recovering from COVID-19 and the war in Ukraine, both of which interrupted supply chains and sent shock waves through the global economy. “We know that we’re not all of the way there yet. That’s why our government is supporting the hard-working Canadians who need help the most,” she said.
Importance of Fiscal Responsibility
During the press conference, Ms. Freeland was asked about the news that cabinet ministers have been told to come up with $15 billion in spending cuts before Oct. 2, which was a promise first made in the 2023 federal budget. The budget report projected that spending cuts on consulting, professional services, and travel would amount to just $500 million in 2023–2024, then $1.65 billion each year until 2028–2029.Ms. Freeland said that while it was important to make investments in “the things Canadians need,” such as the one-time grocery rebate and tax credits for investments in clean electricity and manufacturing, the federal government needed to “maintain a fiscally responsible position.”
“It’s about ensuring that we, as the government, can support the most vulnerable among us, can invest in jobs and economic growth, and can do it while remaining fiscally responsible and maintaining Canada’s triple-A rating,” Ms. Freeland said. “I am absolutely confident that those savings can be found and I’m also confident that they are essential.”
Throughout 2023, the finance minister has repeatedly said the federal government’s ability to spend is “not infinite” and that it cannot continue to “pour fiscal fuel on the flames of inflation.”
Recognizing the government’s duty to curb the increasing inflation, Ms. Freeland commented on Aug. 14 in response to reporters’ questions about affordability for Nova Scotians, stating, “I think it is very important not to make the problem worse.”
