Governments that want to ease inflation for Canadians must choose measures that are well-targeted and temporary, said Bank of Canada Governor Tiff Macklem.
At a House of Commons committee meeting on Wednesday, Conservative MP Adam Chambers asked the governor which of two options is a better way to deliver aid without fueling inflation: direct transfers to low-income Canadians or energy aid packages.
In response, the governor said that targeted and temporary measures fuel inflation less than broadly supported measures.
“Policies aimed at mitigating the effects of inflation on citizens really need to be targeted, targeting the most vulnerable, and temporarily, temporarily while this is an inflation problem,” Macklem said.
The federal government, along with provincial governments, has responded to high inflation with measures to soften the financial blow to Canadians. While some measures targeted lower incomes, others were widely supported.
The federal government recently temporarily doubled the GST rebate, a benefit that goes to low- and modest-income Canadians.
Counties have also brought relief, with many opting to send checks more widely.
Most recently, Alberta Premier Danielle Smith announced a slew of inflation measures on Tuesday, including payments of $600 per child for families earning less than $180,000 a year. The same income limit and benefits apply to seniors.
Macklem, along with Senior Deputy Governor Carolyn Rogers, answered questions from MPs on the House of Commons standing committee on finance.
Bank of Canada officials faced questions about the central bank’s policy decisions in the face of decades of high inflation.
In October, annual inflation stood at 6.9 percent, down from a peak of 8.1 percent in June.
Since March, the Bank of Canada has hiked rates six times in a row and is expected to announce another rate hike in December.
The central bank aims to cool spending in the economy by increasing the cost of borrowing for Canadians and businesses.
A significant economic slowdown is expected to be ahead as higher interest rates work their way through the economy. However, many economists remain cautiously optimistic that even if Canada slips into a recession, it will be short-lived.
This report from The Canadian Press was first published on November 23, 2022.