Ottawa – Crushing interest rates will punish the Canadian economy and stifle economic growth, the Senate Committee on Banking, Commerce and the Economy said in a report released Wednesday, February 15, 2023.

Between September and December 2022, the committee heard testimony from a wide range of prominent economists and other experts to assess the state of Canada’s economy and provide a range of policy options to inform public debate on how federal institutions should react to high inflation and a grim economic outlook.

While witnesses expressed a considerable diversity of opinion, several points of consensus emerged. For example, there was agreement that inflation is now largely driven by domestic factors and that public spending should be constrained and more targeted.

Committee members also considered the Bank of Canada’s economic interventions; the committee believes the bank should be more transparent and periodically make public its assessment of the effect of its interventions.

Quick Facts

• Current and former governors of the Bank of Canada, current and former parliamentary budget officers, prominent academics and private sector economists contributed their expertise to this study.
• There was broad agreement that increased competition can help fight inflation in the long term.
• There was also broad agreement that rising interest rates could exacerbate housing issues in Canada.

Quotes

“Our report offers a range of views from the people who live and study these issues every day. It is a timely and solid foundation for policymakers as our economy continues to grapple with the post-COVID recovery.”

- Senator Pamela Wallin, Chair of the committee

“The experts agree: creating a more competitive environment for Canadian enterprises would be a hedge against future inflation and drive costs down for consumers.” 

- Senator Colin Deacon, Deputy Chair of the committee

“I have advocated for the Bank of Canada to adopt a dual mandate to include the pursuit of full employment. The evidence we heard confirms that there are many benefits to full employment, including more employment income, less poverty and higher government revenues. For these reasons, the bank must exercise caution when it raises interest rates.”

- Senator Diane Bellemare, member of the Subcommittee on Agenda and Procedure

“Inflation is hurting Canadians. Understanding how we’ve gotten here — and what federal actors could have done differently — is an important exercise in accountability. There is clear evidence that federal spending must be reduced to avoid making the current situation worse.”

- Senator Elizabeth Marshall, member of the committee

Associated Links

• Read the report: The State of the Canadian Economy and Inflation.
• Follow the committee on social media using the hashtag #BANC.
• Subscribe to email alerts for Senate committees.
• Sign up for the Senate eNewsletter.

For more information:

Ben Silverman
Communications Officer | Senate of Canada
343-574-4950 | ben.silverman@sen.parl.gc.ca