MNI: G7 Host Focus In '25 Is Economic Security Cooperation-BOC
MNI (OTTAWA) - Next year's G7 meetings hosted by Canada will focus on improving economic security cooperation at a time of increased fragmentation and frayed public trust in policymakers, according to Tiff Macklem, governor of the country's central bank.
"Democracies of the G7 will be stronger if we confront our shared economic security issues together," Macklem said in the text of a speech he is giving Monday in Vancouver. "Higher sovereign debt, higher long-term interest rates and lower economic growth is making the world more vulnerable. War, geopolitical tensions and the rising threat of protectionism are compounding these vulnerabilities."
Other areas of work for the G7 include "the risk and opportunity of AI, the potential vulnerabilities arising from non-bank financial institutions, and the need to improve cross-border payment systems" Macklem said.
Harmony appears difficult with Donald Trump threatening a 25% tariff on Canadian exports and other global trade restrictions. Canada's last time hosting the G7 ended on a sour note with Trump calling Prime Minister Justin Trudeau "very dishonest and weak" as the meetings concluded without a clear joint statement.
WHO WILL LEAD CANADA?
"International cooperation is getting harder, but as shared global risks accumulate, it is more important than ever," Macklem said. The Governor also reiterated views from last Wednesday's half-point rate cut that further and more gradual easing can be justified while noting Trump's tariff threat is "a major new uncertainty." (See: MNI INTERVIEW: BOC Could Cut 50 BPS Again On Tariffs-Ex Econ)
Canada's agenda will also be scrambled if Trudeau is forced into a snap election early next year with polls showing he would be replaced by Conservative Pierre Poilievre. At times Poilievre has referred to a "Canada First" approach and he's often criticized "globalist" policies.
Firing Governor Macklem is also one of Poilievre's pledges, blaming him for the burst of inflation in the pandemic rebound and at times suggesting the central bank's QE amounted to underwriting reckless budget deficits.
The BOC is nearly finished its review of extraordinary policies and it will also include views of some independent experts, Macklem said.
'PEOPLE FEEL RIPPED OFF'
"Our pandemic response was effective in restoring market functioning, preventing an even worse economic calamity, and supporting the recovery," he said. "But we can see in retrospect that when we use extraordinary tools, we need to be clear about what we’re trying to achieve with those tools and under what conditions they’ll no longer be needed."
During the pandemic the Bank began a set of programs to buy up different types of securities aimed at market stability then later said it was moving into a more broad QE policy. That shift didn't lead to the same kind of public dismay as the surge of inflation to 8%.
"While inflation is low once again, many prices are still a lot higher than they were before the pandemic. So people feel ripped off. And that erodes public trust in our economic system," Macklem said. (See: MNI: Canadians Doubt BOC Wins Inflation Fight-Internal Polls)
The Bank is also turning to its five-year review of the inflation-targeting agreement signed with the finance minister, and Macklem said one of the questions will be whether the 2% target in place for decades remains the best goal. Other potential questions include measuring trend inflation and the relationship between monetary policy and affordability, he said. (See: MNI INTERVIEW: Canada Home Agency Sees Deeper Supply Shortfall)