‘Not Out of the Woods Yet’: Freeland Warns of Economic ‘Bumps’ Ahead

Deputy Prime Minister and Finance Minister Chrystia Freeland rises during question period in the House of Commons on Parliament Hill in Ottawa on Feb. 13, 2023. The Canadian Press/Patrick Doyle

Despite getting through the worst of the pandemic, Deputy Prime Minister Chrystia Freeland says Canadians are “not out of the woods yet” and should brace for a number of economic “bumps” ahead due to high inflation and interest rates.

Speaking to reporters in Mississauga, Ont., on March 8, Freeland addressed the Bank of Canada’s pause on interest rate hikes announced earlier the same day.

“Of course, there are going to be bumps in the road ahead,” Freeland said, adding that the country has “come out the other side” of the COVID-19 pandemic, which she called a “huge, gaping chasm.”

“We’re not out of the woods yet,” Freeland added. “Inflation is still too high and interest rates are really high, and have gone up extremely fast—these are real challenges for Canadians.”

“I would be either naive or a liar if I didn’t admit to you that ‘yeah, there will be some bumps ahead of us.’ And I don’t think that anyone can perfectly predict exactly what those bumps will be or where we will encounter them.”

The Bank of Canada’s pause on rate hikes comes after it raised the policy rate eight consecutive times for a combined 4.25 percentage points starting in March 2022.

Despite the pause, the central bank says it is “prepared to increase the policy rate further if needed to return inflation to the 2 percent target.”

Canada’s inflation rate currently sits just below six percent.

Inflation

Freeland also told reporters on March 8 that she is unsure how exactly how “the next few weeks and months will unfold,” but added that Canada is “extremely well-positioned” for any future economic challenges.

Statistics Canada representatives recently told a House of Commons committee that over one-third of Canadians are currently struggling to pay for groceries due to rising food prices.

Matthew MacDonald, assistant director of Statistics Canada’s Consumer Prices Division, told the Commons Standing Committee on Agriculture on March 6 that prices in every food category on a year-over-year basis rose even higher in January 2023 than they were in 2022.

A previous federal study by the Financial Consumer Agency of Canada also found that around 40 percent of Canadians are borrowing money to cover the costs of everyday expenses like food and rent.

Meanwhile, the Bank of Canada says it expects the country’s inflation rate to fall to around three percent by the middle of 2023.

Canada’s inflation rate went down from 6.3 percent in December 2022 to 5.9 percent in January of this year.

Rahul Vaidyanath contributed to this report.