(Bloomberg) — Finance Minister Chrystia Freeland tried to reassure Canadians that the economy is still headed for calmer times after the central bank unexpectedly resumed raising interest rates.
“There are a lot of Canadians who are anxious right now and who will be concerned when they see this step taken by the Bank of Canada,” Freeland told reporters outside the Ottawa legislature.
But she said the robust labor market and the “core strength and the resilience of the Canadian economy” mean people still have steady paychecks despite rising mortgage payments and annual inflation still hovering above 4%.
“Having a good job is the key to the wellbeing of every single Canadian and their family. It’s the key to being able to pay your rent or your mortgage,” Freeland said.
After pausing its rate-hiking cycle in January, policymakers led by Governor Tiff Macklem raised the overnight lending rate on Wednesday by 25 basis points to 4.75% — the highest since 2001.
The move was expected by only about one in five analysts in a Bloomberg survey. It was prompted by evidence of an overheating economy, including stronger-than-expected first quarter output growth, an uptick in inflation and a rebound in housing-market activity.
Freeland pointed to the fact the Bank of Canada still sees inflation coming down to 3% this summer. “We are coming to the end of this difficult path out of the Covid economy,” she said. “The destination is stable, low inflation and steady, strong growth. And that is the direction that we are heading.”
However, the opposition Conservative Party quickly declared it will be going on the attack against Freeland and Prime Minister Justin Trudeau. “Trudeau must get his spending under control before it’s too late,” Conservative Leader Pierre Poilievre said in a statement, calling the rate hike “a disaster for the many Canadians barely hanging on.”
Poilievre’s finance critic, Jasraj Singh Hallan, also published a letter requesting an emergency debate on the topic in parliament.