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Bank of Canada’s continuous rate hike is not slowing down inflation

November 17, 2022

Bruske: It’s time to address the true causes of current inflation, protect Canadians against its effects, and safeguard jobs and incomes.

OTTAWA –– Canada’s inflation rate held at 6.9 per cent in October, despite the Bank of Canada’s aggressive interest rate increases, while workers across Canada continue to see their cost of living rise. 

“To have the Bank of Canada Governor tell workers that unemployment needs to rise in the name of slowing inflation when these interest rate increases aren’t doing what he says they will, is a step too far,” said Bea Bruske, President of the Canadian Labour Congress. ‘’Big corporations are cashing in all-time high profits while Canadians face the worst food retail inflation in four decades with grocery prices jumping 11.4 per cent.’’ 

In a risk scenario released by the Parliament Budget Officer on November 9, modelling shows that increasing interest rates may not move inflation for years. The Bank of Canada’s single-minded pursuit of the inflation target is not the only way, we have proof of that today. It doesn’t make sense to rely on decades-old monetary policy to solve today’s economic challenges.

Since inflation first broke through the Bank of Canada in March 2021, the average hourly wages have continuously lagged behind price inflation. Adding to this is the increasing inequality between workers and corporations, affecting the most vulnerable. Corporate profits have reached their highest-ever share of GDP while workers’ share has systematically decreased.

Canada’s unions are urging Parliament to act now and to make profiteering corporations pay their fair share – and invest that money in helping struggling families. We need investments in programs like pharmacare, child care and long-term care, to alleviate some of the costs families face, ultimately helping reduce the impacts of inflation.

“People in Canada need the government to address the real causes of inflation and offer fiscal, labour market and social policy measures that will blunt the impact on vulnerable families,” said Bruske. “Workers drive this economy, we need to put the wellbeing of people at the centre of any policy planning and we need tax reform to ensure these big businesses are paying their fair share.” 

A report released by the Canadian Labour Congress and Centre for Future Work proposed policy alternatives to rate hikes, policies that put people at the heart of Canada’s monetary and fiscal policies. The report also explains the shortcomings of old-school economic theories, outlines the real impact of a recession on people and proposes. A copy of the report can be downloaded here.

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