MNI: BOC Calls Out Internal Trade Kinks In Affordability Pinch
Bank of Canada Senior Deputy Governor Carolyn Rogers said boosting laggard productivity is the best way to help consumers deal with inflation and took the rare step of challenging provincial leaders who have blamed that frustration on slow interest-rate cuts by pointing to an "obvious" chance to eliminate domestic trade barriers.
"Canadians are still grappling with a higher cost of living. Inflation has been back within the Bank of Canada’s target band of 1%–3% for a year and a half now, but life is more expensive than it was. This is frustrating for everyone," Rogers said in the text of a speech Thursday in Toronto.
The remarks didn't provide an outlook for the policy rate, lowered 25bps to 2.5% last month after peaking at 5% as inflation surged through pandemic shutdowns. With Canada facing another "massive shock" from the U.S. trade war moves by companies and governments to become more efficient are even more important, Rogers said.
"Higher productivity won’t make Canada immune to US trade policy, but it would help buffer the effects of tariffs. And it’s the clearest path to boosting real wages, making life more affordable," she said. "And a more productive economy is more attractive to investors and trading partners."
Provincial leaders have stuck to bilateral trade deals rather than building a nationwide market, leaving in place barriers such as rules restricting what kind of portable washrooms a construction company can use and the transportation of housing products. With housing and food keeping core inflation close to 3% even with headline CPI below the Bank's 2% target after the recent elimination of a fuel tax, leaders like Ontario's Doug Ford have continued with social media comments urging looser monetary policy to help consumers.
Rogers said protectionism remains a global and a local problem. "Getting rid of competitive protections between provinces is an obvious place to start, but it shouldn’t be where we end. We need to think bigger than that," she said.
