Senior Deputy Governor Carolyn Wilkins answers a question during a press conference at the Bank Of Canada in Ottawa on Thursday, May 16, 2019. Wilkins, the second-in-command at the Bank of Canada says maintaining the independence of the central bank will be key to aiding the economy during and after the COVID-19 pandemic.THE CANADIAN PRESS/Sean Kilpatrick

Bank of Canada’s independence key to aiding post-COVID recovery, Wilkins says

The bank’s balance sheet has more than tripled from around $120 billion in early March

The Bank of Canada will need to maintain its independence to aid the economy during and after the COVID-19 pandemic, particularly as the country’s debt levels rise, says the bank’s second-in-command.

In a speech on Monday, senior deputy governor Carolyn Wilkins detailed how the bank’s actions through the pandemic have been aimed at ensuring businesses and individuals can access lines of credit and short-term loans, and spur demand during an expected recovery through low interest rates.

The bank’s balance sheet has more than tripled from around $120 billion in early March before the shutdown, to around $385 billion as of last week as it purchases more federal and provincial bonds, effectively providing low-cost loans to finance government stimulus that federally stands at roughly $146 billion.

Wilkins said the financial risk to taxpayers is low because of restrictions around the bond purchase programs.

The country will be left with more public and private debt than before the pandemic forced a freeze on economic activity, she said.

“Whether it’s a risk of inflation or deflation, central bank credibility is critical,” she said in the text of her speech posted online by the bank.

“This requires keeping our eye on the ball in terms of our mandate and retaining the operational independence to achieve it.”

The question of keeping the bank free of political influence faced Finance Minister Bill Morneau last week when he unveiled the next governor, Tiff Macklem.

The Liberals and central bank have an “effectively working relationship,” Morneau said at the Friday press conference, adding the Liberals saw ”the independence of the Bank of Canada as critical” to the future of the economy.

Wilkins was considered a top candidate to replace outgoing governor Stephen Poloz, just as Macklem had been the favourite seven years ago when he was the bank’s No. 2 and Poloz got the top job.

READ MORE: 7.3M Canadians have received CERB, as wage subsidy pays salaries for another 1.7M: feds

The choice to appoint Macklem received praise in some quarters: private sector economists spoke highly of his skills and environment groups saw promise in his interest in the effects of climate change on the economy.

“Canada needed to move climate change to the front of the financial line, and with Tiff as incoming governor that need has been met,” said Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo.

But there was criticism as well, including from some women’s groups who questioned why Prime Minister Justin Trudeau’s government didn’t appoint Wilkins to head an institution that has never had a female governor.

“We made the determination on who would be the best to see us through this difficult time and seven years into the future as well, and I know that Tiff Macklem will do just that,” Trudeau said Monday outside his Ottawa residence.

The bank estimates that pandemic-related restrictions, which have closed non-essential businesses and led to more than seven million workers receiving federal aid, will result in a 15 to 30 per cent drop in gross domestic product for the second quarter from its level in late 2019.

Wilkins said the bank hasn’t published a full forecast because of the uncertainty about when restrictions will be lifted. There could also be other head winds slowing a recovery, she said, citing low oil prices.

“But even in a good scenario, lost output will be made up only gradually as containment measures are lifted, people return to work and production ramps up,” she said.

That level of uncertainty is why the Liberals have yet to introduce a budget, Trudeau said.

The government had pledged to introduce the spending blueprint at the end of March, but scuttled plans after MPs agreed to put the House of Commons on an extended hiatus as the pandemic took hold.

Trudeau said the Liberals are looking at when to present a budget or an economic update.

— With files from Mia Rabson

Jordan Press, The Canadian Press


Like us on Facebook and follow us on Twitter.

Coronaviruseconomy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Fire damages Harrop nursery

The cause of the blaze is under investigation

Castlegar Rotary Club loses $40,000 in revenue from COVID-19 crisis

The club has had to change much of its operations during the crisis

Nelson Innovation Centre to host pitch competition

Deadline to apply for the first of three events is Sept. 24

Two new fires burning in the Arrow Lakes Region

One of the fires is burning approximately 30 kilometres northwest of Castlegar

Drug alert issued in Grand Forks after fentanyl, ‘benzos’ detected in test

They are advising additional care and to have drugs tested before using

‘Don’t kill my mom’: Ryan Reynolds calls on young British Columbians to be COVID-smart

‘Deadpool’ celebrity responds to premier’s call for social influence support

Widow of slain Red Deer doctor thanks community for support ahead of vigil

Fellow doctors, members of the public will gather for a physically-distanced vigil in central Alberta

Protesters showcase massive old yellow cedar as Port Renfrew area forest blockade continues

9.5-foot-wide yellow cedar measured by Ancient Forest Alliance campaigners in Fairy Creek watershed

Taking dog feces and a jackhammer to neighbourhood dispute costs B.C. man $16,000

‘Pellegrin’s actions were motivated by malice …a vindictive, pointless, dangerous and unlawful act’

Racist stickers at Keremeos pub leaves group uneasy and angry

The ‘OK’ hand gesture is a known hate-symbol

VIDEO: World responds to B.C. girl after pandemic cancels birthday party

Dozens of cards and numerous packages were delivered to six-year-old Charlie Manning

Expected fall peak of COVID-19 in Canada could overwhelm health systems: Tam

National modelling projections released Friday show an expected peak in cases this fall

Hundreds of sea lions to be killed on Columbia River in effort to save endangered fish

Nearly 22,000 comments received during public review were opposed, fewer than 200 were for

B.C.’s fuel suppliers to publish prices to provide accountability: minister

Bruce Ralston says move will ensure industry publicly accountable for unexplained prices increases

Most Read