Holt said any argument that federal spending hasn’t fueled price pressures is inconsistent with economic fundamentals in the wake of the feds announcing $4.5 billion in other spending.
“It is no coincidence that it has arrived just in time for the holiday shopping season. If you didn’t want the people to spend it and you didn’t want the people to spend it, give it to the people in February — when most of us are already dealing with two feet of snow on the ground after we’ve already blown our wallets over the holiday season,” he said in an interview of on Friday.
“There’s this narrative that says inflation has nothing to do with incentives at home — central banks, governments, didn’t cause any of that — it’s just all global supply chains and greedy corporations. This suits their cause, but is actually false.’
Canadian inflation moderated from a nearly four-decade high of 8.1 per cent, easing to 7.6 per cent in July, but still remains more than three times higher than the Bank of Canada’s two per cent target. The central bank responded by raising its policy rate to 3.25% from 0.25% during the pandemic, although the conventional wisdom is that it takes between 18 and 24 months for rate hikes to work their way through the economy.
Holt said the federal government could help curb inflation in the domestic economy by easing new spending.
“The appropriate policy response is to stop this habit of serial stimulus — serial stimulus is throwing more and more cash, driving more and more inflation, making the Bank of Canada’s job ever harder,” he said.
