Slowdown will impact low-income earners most, says Bank of Canada governor

Low-income Canadians have been hit the hardest by high inflation and will be disproportionately affected by the coming economic slowdown, Bank of Canada Governor Tiff Macklem said in a speech on Monday.

In his opening remarks at a central bank conference on diversity, equity and inclusion, Macklem noted that high inflation can have harmful and uneven effects.

“High inflation affects everyone, but low-income households feel the burden of high inflation the most,” the governor said. “Low-income Canadians will also be disproportionately affected by the slowdown.”

The swift pace of the recovery and rebound in employment will be mitigating factors for those hardest hit by the pandemic — low-income Canadians, youth and women, he said.

“We’re still learning about the long-term effects of the pandemic, but scarring isn’t as common as we feared,” he said. “Growth picked up quickly, and workers didn’t sit on the sidelines for long.”

Restoring price stability is “not going to be easy,” the premier said, but the end result of raising rates will be better for all Canadians.

The Bank of Canada has raised interest rates sharply this year in response to inflation hitting levels not seen in nearly four decades. Since March, the central bank has raised the benchmark interest rate six times in a row, raising the benchmark rate from 0.25% to 3.75%.

Higher interest rates are expected to cool the economy significantly, while rapid rate hikes could tip the economy into recession.

Labor groups have been vocal about the Bank of Canada’s efforts to curb inflation, raising concerns about what a slowing economy will mean for workers.

The governor has previously said unemployment will rise as the economy cools, but is not expected to be high by historical standards.

While not a substitute for higher interest rates, Macklem said increasing supply in the economy would help ease inflation, adding that the more that was done to help supply grow, the less demand would need to be curbed.

Macklem also spoke about inequities in the discipline of economics.

Turning to the subject of the conference, Macklem said economics was undergoing a “me too” reckoning, acknowledging that women in the field had to deal with an additional burden of harassment.

He said he has worked to create a culture of respect at the Bank of Canada, and acknowledged that his female colleagues faced harassment he had never faced before.

“Let me be clear. Harassment of any kind cannot be ignored, condoned or dismissed.”

Nojoud Al Mallees, Canadian Press

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