Our Glorious Ontario Leader Doug Ford seems to think he knows more about macroeconomics than the combined wisdom of the financial.egg-heads of the Bank of Canada. The BoC increased its key interest rate by 25 basis point to 2.5%, the first time it has done so since July 2023. This is still quite low, certainly compared to the USA's 3.9%, but there are those who object to any increase, as a matter of principle.
Mr. Ford's comments on the rate hike were not subtle: "Raising interest rates right now is a massive mistake. Higher rates won't get oil moving through the Strait of Hormuz or lower tariffs on Canadian businsses." Well, duh. Neither will NOT changing interest rates for that matter. And I'm pretty sure the Bank of Canada is quite aware of the stakes here. But things are not as simple as Mr. Ford likes to make them appear.
Of course, the Bank did not take this step lightly. It is quite aware that the Canadian economy is struggling at the momemt, and that this move is likely to dampen consumer demand still further. But inflation continues to be stubbornly high - currently around 3.1% - and so well above the BoC's target of 2%, and this is the main reason for the interest rate hike. It has looked at all the ramifications and decided that on balance, this was the right move.
Doug Ford, however, apparently doesn't care about inflation. Much like Donald Trump, he only cares about the strength of the economy in the province he represents, lest voters decide to blame him for it.
Granted, this particular decision by the BoC was an especially fraught one, and there are those who believe the rate hike may have been premature, given the current climate of uncertainty and the ongoing weakness in the economy. But still, Mr. Ford, let the Bank of Canada do its job. It knows much more than you do about what makes the country's finances tick, and what's good for Canada and Ontario.
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