Liberal Inflation Hawks?
In assessing the Bank of Canadaâ€™s Monetary Policy Report, John McCallum asked whether “the budget, with its large increase in spending, might be contributing to an overheating of the economy at this time?”
Similarly, in commenting on the Labour Force Survey, Doug Porter of BMO seemed concerned that a supposedly tight labour market and higher wages would spur inflation.
Todayâ€™s Consumer Price Index figures should temper these concerns. Inflation not only remained low, but fell slightly.
Hon. John McCallum (Markhamâ€”Unionville, Lib.):
First of all, I’d like to congratulate the governor for his great service to the country and for hitting the inflation target right on, I think, in his period in office, and for bringing a certain humanity to the Bank of Canada. I won’t go on further in this laudatory way, because I do have a couple of questions I would like to cover.
First of all, you were saying that, if anything, the inflation risk was a little bit on the upside. As you may have noticed, Andrew Coyne, in particular, has been saying that this is the biggest spending budgetâ€”a $25 billion increase in spending over two yearsâ€”and that the percentage increase in government spending has been greater than the average under the past few years of the Liberal government.
So I guess my question is, in view of the fact that we have near record low unemployment and you’re saying that the inflation upside risk is a little bigger than the downside risk, do you have concerns that the budget, with its large increase in spending, might be contributing to an overheating of the economy at this time?