MNI BRIEF: Canada Says New Benefits Won't Fuel More Inflation

Canadian Prime Minister Justin Trudeau announced new tax credits and subsidies for housing and dental care Tuesday as he faces a new political rival who, like many experts, warns that more deficit spending will fuel inflation.

Trudeau's announcement at a meeting of Liberal lawmakers before Parliament returns later this month shifts from months of suggesting such a package could make the situation worse. "We are confident that they will not contribute to increased inflation,” he said, without giving the plan's cost. “We are retaining fiscal firepower and at the same time ensuring those that need support won’t get left behind.”

The announcement comes just as Conservatives elected Pierre Poilievre their leader, a populist who has attacked inflationary deficits and pledged to fire the BOC Governor. Canada's finances remain strong after record pandemic deficits, with its AAA credit rating affirmed last week. But CIBC economists warn new benefits will likely fuel inflation and a former top cabinet official has told MNI fiscal and monetary stimulus should be removed quickly and in tandem to check inflation. (See MNI: Canada Should End Stimulus Symmetrically- Ex Cabinet Czar)