New fiscal guardrails ‘helpful’ for monetary policy: Macklem

Bank of Canada governor Tiff Macklem says the federal government’s new fiscal guardrails unveiled in its fall economic statement are helpful for monetary policy.

During a news conference Wednesday, Macklem weighed in on the federal government’s updated fiscal projections as well as new rules that aim to limit deficits.

“From the perspective of monetary policy, the fall economic statement suggests that the government is not adding new or additional inflationary pressures over the next couple of years, which is the critical period over which we will be looking to reduce inflation and get it back to the target,” Macklem said.

“The fall economic statement also includes some new fiscal guardrails beyond the near term, and from the perspective of monetary policy, I do think that’s helpful.”

The fall economic statement made new commitments on how the federal government will approach its finances, including setting a goal to keep deficits below 1% of GDP beginning in 2026-27.

The Liberals are also aiming to maintain the current fiscal year’s deficit at or below the spring budget projection of $40.1 billion and lower the debt-to-GDP ratio in 2024-25 relative to the projection in the fall economic statement.

The new fiscal objectives come as the federal government faces calls to avoid fuelling inflation with further spending and to be mindful of a slowing economy’s impact on government revenues.

Macklem has previously urged for fiscal policy to row in the same direction as monetary policy, noting that on aggregate, spending plans of all levels of government over the next year risk fuelling inflation.

Nojoud Al Mallees, The Canadian Press

Nojoud Al Mallees is a reporter with The Canadian Press, a national news agency headquartered in Toronto and founded in 1917.