Freeland leaves the door open to further action to address economic volatility

Gas pumps Source: iStock

The federal government is prepared to take further action to address more severe economic volatility, but Finance Minister Chrystia Freeland wouldn't say if a hard landing for Canada's housing market would be the trigger for such moves.

Freeland told reporters Thursday that achieving a soft landing is going to be challenging, but Canada has a better shot at it than other countries.

“We understand we need to be agile, we need to be open to further action as the situation develops,'' she said after addressing the Empire Club of Canada.

When asked if that includes reducing the gas tax to provide some relief at the pumps, Freeland said the government is “very much leaving the door open to further action.”

Freeland, who is also deputy prime minister, said the current volatile and uncertain economic time is largely driven by a challenging global environment.

“And so for that reason, I can't make any promises to Canadians about how the next weeks and months are going to unfold. And I want to be honest about that,'' she said after outlining the government's plan to help the country's most vulnerable deal with rising inflation.

“But I want to balance that candour with a really confident and true assertion and that is Canada is going into this turbulent global economic environment with real fundament economic strengths.''

Among them is a very well-regulated financial sector, including the mortgage market that has withstood previous economic challenges, she said.

Earlier, the minister detailed financial commitments to “help make life more affordable for millions of Canadians.''

In her speech, Freeland highlighted the federal government's Affordability Plan, which she referred to as a suite of measures totalling $8.9 billion in new support for Canadians in 2022.

The measures, which include enhancing the Canada Workers Benefit and Old Age Security programs, helping struggling renters, cutting childcare costs and giving dental care to poorer children, were all included in the past two federal budgets and are now taking effect.

Freeland called skyrocketing inflation a “global phenomenon'' that is being driven by lasting impacts of the COVID-19 pandemic, ongoing lockdowns in China and Russia's invasion of Ukraine.

“Jobs are plentiful and business is booming, but it is also harder for a lot of Canadians to pay their bills at the end of the month,'' Freeland said in her speech.

Last month, Statistics Canada reported the inflation rate for April rose 6.8 per cent compared with a year ago. That's the highest since January 1991 but is lower than Britain, Germany and the United States. The federal agency is expected to release May's inflation report next week, with economists warning it could broach 7 per cent.

The U.S. Federal Reserve hiked its key interest rate by three-quarters of a percentage point on Wednesday – its largest hike since 1994, leading economists to predict the Bank of Canada will follow suit next month.

Canada's central bank has increased its key rate by half a percentage point twice in recent months, bringing it to 1.5 per cent in June and governor Tiff Macklem has hinted he is prepared to act “more forcefully'' if high inflation persists.

© 2022 The Canadian Press

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