Economy

Sources: Stocksak. Canada’s fiscal update won’t make the job of the central bank any harder.


© Stocksak. FILE PHOTO – Governor of the Bank of Canada Tiff Maklem walks past the Bank of Canada building in Ottawa (Ontario, Canada) June 22, 2020. REUTERS/Blair Gable

By Steve Scherer

OTTAWA, (Stocksak), – Canada’s Liberal government will not reveal a fiscal update next week. It could contain additional targeted spending but it will not make it harder for the central bank, two senior government sources confirmed to Stocksak.

The so-called Fall Economic Statement (FES) is published annually. It contains updated economic forecasts and often new spending plans. Priorities that have changed since April were reflected in the budget.

One source stated that “the FES will not make it more difficult for the Bank of Canada” to fight inflation. “It’s important for the federal government to continue to show responsible fiscal stewardship now,” said a source familiar.

According to a second source, the main focus is on supporting families and workers in a difficult economic environment.

The second source said that the FES will “take a responsible course, invest in Canadians in targeted ways, while maintaining fiscal firepower for any challenges that may arise in the world,” and the second source added.

Neither source would provide details on where “targeted spending” might be. The Finance Ministry declined comment. The sources weren’t authorized to speak on the record.

Investors will find relief from the government’s modest spending plans, which will further assist the Bank of Canada in its efforts to combat inflation. Analysts earlier this month stated that Canada should not seek new stimulus from the FES and pay attention to recent market turmoil in Britain.

The Bank of Canada announced a smaller-than-expected interest rate hike on Wednesday and said it was getting closer to the end of its historic tightening campaign. It predicted that economic activity would be almost flat in the fourth quarter of 2022 and the first six months of 2023.

Canada’s inflation rate has fallen to 6.9% from 8.1% in the peak, but core measures are still robust and consistent.

Chrystia Freiland, Canada’s Finance Minister, said earlier this month in a statement that Canada must increase incentives for clean technology industry growth. This comes after the United States made huge investments in August to speed up its green transition.

She stated that there would be some “response to the U.S.” in the FES and next year’s budget.

According to the first source, “The budget will have the lion’s share.”

Jonathan Wilkinson, Natural Resources Minister said this week that additional support for hydrogen and critical minerals was warranted. However, he did not specify whether any action would be taken in either the FES budget or next year.

“We have stated that in some areas we consider strategic, we will definitely be looking to respond. Wilkinson stated that hydrogen is one of those areas and that the government will be taking a hard look at areas such as mineral processing and battery manufacturing.

($1 = 1.3557 Canadian dollars)

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