Macklem Dials Up Tone On Government Spending Plans

Our best estimate for potential output is 2%. If government spending is growing at 2% or less then it’s not adding faster to demand than supply is growing. Over the last year it was below 2% so it hasn’t been adding undue inflationary pressures. If you look at our forecast in the MPR, cross-government spending plans see government spending next year at about 2.5%. In an environment where we’re trying to moderate spending and get inflation down, that’s not helpful. It would be helpful if governments considered the inflationary impact, it’ll be easier if rowing in the same direction.