Bank of Canada goes political

It's customary for central banks to stay away from political issues as much as they possibly can, and the Bank of Canada is generally scrupulous about this.  However, there have been signs in recent times that the Bank is somewhat frustrated at the fact that its efforts to reduce inflation are being offset by the fiscal incontinence of PM Trudeau and Finance Minister Freeland.

Now, with the Federal budget a month away and an election likely in the next year or so, the Bank seems to be going quite a bit further. In a remarkable speech in Halifax NS today, Senior Deputy Governor Carolyn Rogers addressed "The Productivity Problem".  It has been well-known for many years that Canada's productivity performance is much worse than that of most other developed countries, with Italy the sole exception. Ms Rogers sees the solution in more focused education, better integration of skilled immigrants into the workforce, heightened competition and much higher business investment -- "In fact, investment levels have decreased over the past decade".

Objectively speaking, all of this is almost indisputable, but it is hard to argue that any of it falls within the remit of the Bank as it is generally understood.  It is almost inevitable that opposition leader Pierre Poilievre will seize on the Bank's analysis to further his pre-election campaigning, and it is hard to deny him the right to do so, given that he has already been making many of the same points himself. 

So what is the Bank up to?  It is unlikely that Trudeau and Freeland will be pleased at what Ms Rogers said. It is easy to pin the blame on a Government that has been in power for the better part of a decade -- note again the above quote about falling investment, and keep in mind that the government has seen fit to boost immigration to an extraordinary degree without even the semblance of a plan to help the newcomers to integrate and contribute. As for Poilievre, he has been a regular critic of the Bank, but it hardly seems likely that the Bank is now trying to ingratiate itself with him in case he gets elected.

All in all, it's a worthwhile speech that will justifiably trigger plenty of debate. The mystery is why it came from the Bank of Canada rather than one of the private-sector think tanks.