British Columbia Premier David Eby has called on the Bank of Canada to halt further interest rate hikes, saying people are “hurting,” and another rate increase next month might worsen, and not reduce, inflation.
In a letter Thursday to Bank of Canada governor Tiff Macklem, Eby urged him to consider the “human impact” of rate hikes, which the bank has employed as an anti-inflationary measure, before making a decision next Wednesday.
Asked why he reached out to Macklem when the Bank of Canada is an independent entity, Eby said he’s hearing every day from B.C. residents “crushed by the cost of daily life,” and it’s his job to speak up for them.
“I think it is critically important to go on the record … to point out to the Bank of Canada that Statistics Canada is saying that the biggest driver of inflation in our country right now is rising mortgage rates,” Eby said Thursday during an unrelated press conference.
Eby acknowledged that he is the first premier to raise the issue with the Bank of Canada and said he also wrote to the federal government to suggest ways they could “work together to bring down costs that don’t involve inflicting this kind of pain on families.”
He highlighted the effects of rising rates on housing in particular, saying much-needed rental housing projects are being put on hold as a result.
“We need all hands on deck to deal with the housing crisis and rising rents,” he said. “We need to build a lot of housing, we need to keep the cost of housing down to address inflation.”
The Bank of Canada had raised rates 10 times since March last year, with the current lending rate at five per cent, the highest in 22 years, Eby’s letter said.
“People in B.C. are already hurting,” he wrote. “In your role as governor, I urge you to consider the full human impact of rate increases and not further increase rates at this time.”
Jagmeet Singh, the federal New Democrat leader, was asked about Eby’s letter and said Thursday that he shares the premier’s concerns.
“The Bank of Canada increasing interest rates has not improved the material conditions of Canadians,” Singh said during a stop in Sooke, B.C., as part of a summer cost-of-living listening tour.
Grocery prices are a major factor in the rising cost of living and “no domestic interest rate is going to bring down the price of groceries,” he said.
The rate hikes have meanwhile made housing even more expensive, he said.
It’s harder for developers to build more homes, rents are increasing, and people with mortgages are fearful when they come up for renewal, said Singh.
Sean Gordon, a Bank of Canada media relations consultant, said in a statement the bank has no comment on Eby’s letter “as we are currently in the blackout period ahead of our next interest rate decision.”
The Bank of Canada announces its key policy decision, the setting of interest rates, eight times a year.
Members of the bank’s Governing Council observe a blackout no-comment period around the time of the decisions, says the bank’s website.
Eby also wrote Thursday to Prime Minister Justin Trudeau calling for a targeted approach to fighting inflation, focusing on housing and infrastructure improvements.
The letter to Trudeau said a focus on such key sectors will have long-term anti-inflationary benefits while growing the economy and improving productivity.
“There are other ways for us to achieve cost stability, but they do require diligence and co-ordination,” said the premier’s letter to Trudeau. “The time is overdue for such an effort. Ahead of September’s rate decisions, I suggest a robust and targeted approach focused on the largest contributors to inflation.”
Eby’s letter to Macklem said “unnecessary” further interest rate increases pose a danger not just to homeowners looking to renew mortgages but to renters, students, seniors, families and small business owners looking to pay bills, just as they start to recover from the COVID-19 pandemic.
Wal van Lierop, a Vancouver-based venture capitalist, said further interest rate increases would hit most Canadians and affect future growth and investment plans of businesses and governments.
“These across-the-board interest rate increases are hurting Canadians, and, in particular, the middle class and everyone below that, and it is hurting government in trying to achieve the goals that they have set for things like affordable housing and fighting climate change,” he said.
Van Lierop said his company, Chrysalix Venture Capital, invests globally in industrial innovations that tackle climate change and help companies reach carbon-neutral targets.
He said he respects the Bank of Canada’s independence but the time has arrived for a more modernized approach to fighting inflation.
“The Bank of Canada has no plan other than trying to achieve a traditional goal of two per cent inflation,” said van Lierop. “While that was laudable in the 1980s, I think it is now up to the Bank of Canada to start to innovate and not just use the methods they have used in the past 50 years, basically a sledgehammer of all-across-the-board rate increases.”