Conservative MP warns the Bank of Canada risks becoming too political. Not likely, experts say

OTTAWA–The Bank of Canada is pushing back against Conservative questions about its independence from the federal government, saying its inflation target — not politics — is guiding its response to the .

The central bank was pulled into the pandemic political fray Thursday when Conservative finance critic Pierre Poilievre suggested the bank was enabling the Liberal government’s deficit-spending habits.

In an interview with Bloomberg News, Poilievre warned the central bank to avoid acting as an “ATM” for Prime Minister Justin Trudeau’s emergency pandemic programs.

At issue is the bank’s unprecedented purchase of billions of dollars worth of government bonds in an effort to stabilize the economy, which has been rocked by rolling lockdowns during the COVID-19 crisis. The bank has committed to buying $5 billion in government bonds each week during the crisis, a policy known as “quantitative easing” which is intended to inject cash into the economy.

Poilievre called the practice — which has been employed on a massive scale by central banks around the world during the crisis, including in the U.S., U.K., and Australia — “printing money,” and suggested it was a “pyramid scheme.”

“Expanding the bank’s balance sheet during a short-term, once-in-a-lifetime pandemic lockdown is different than perpetually buying and inflating the financial assets of the wealthy at everyone else’s expense,” Poilievre said in a written statement to the Star.

“Trickle-down economics does not work. We need a bottom-up, worker-led recovery.”

The bank has said it will stop its quantitative easing efforts once the economy has recovered after COVID-19.

Poilievre’s characterization was challenged by independent economic analysts who spoke to the Star on Thursday.

“Every central bank is probing the outer limits of monetary intervention to an extent we’ve never seen before, but the Bank of Canada is hardly alone in this intervention,” said David Rosenberg, the chief economist at Rosenberg Research. “I mean, look what’s happened in the world around us.”

Rosenberg pointed out that the bank’s counterpart, the U.S. Federal Reserve, is openly calling on Washington for more fiscal stimulus to weather COVID-19’s economic storm.

“Is Canada behaving irresponsibly? I don’t see that,” Rosenberg said. “Is (Bank of Canada governor) Tiff Macklem somehow political? I find that really hard to believe,”

The Bank of Canada is not typically drawn in to the cut and thrust of partisan politics. As a Crown corporation, it operates at arm’s-length from the government and has legislated independence to set the country’s monetary policy with an eye to keeping inflation low.

While the bank’s efforts to stabilize the Canadian economy during COVID-19 are unprecedented, they should not be viewed as political said Scotiabank chief economist Jean-François Perrault.

“There is no question that central banks around the world … have needed to undertake absolutely exceptional measures to try and stabilize economies and put them on a path to recovery,” said Perrault, who previously worked at the central bank and in government.

“The bank is obviously an inflation targeting organization. That’s job number one, that’s its mandate. I’m 100 per cent convinced beyond a shadow of a doubt that the actions that they’ve taken were all done with the objective of stabilizing inflation.”

In a statement, the Bank of Canada said it has been “consistently clear that the policy actions taken by the bank during the COVID-19 pandemic are always guided by our mandated inflation objective.”

Alex Paterson, a spokesperson for the central bank, also pointed to a previous statement that the bank intends to continue its policy of quantitative easing until the recovery from COVID-19 is “well underway.”

The Liberal government was less guarded in its response to Poilievre’s charges.

“The Conservatives are recklessly politicizing the role of the independent, and widely respected Bank of Canada,” wrote Katherine Cuplinskas, a spokesperson for Deputy Prime Minister and Finance Minister Chrystia Freeland.

Alex Boutilier is an Ottawa-based reporter covering national politics for the Star. Follow him on Twitter: