MNI INTERVIEW: BOC Needs Faster Cuts, Labour Congress Says

MNI (OTTAWA) - Canada's central bank must cut interest rates faster to help families who have fallen behind in the last few years, the country's top union leader told MNI, and because there's little risk elevated wage gains will push inflation back above target.

“We’ve had the worst inflation in decades and then the most aggressive interest-rate hikes in decades, and now we’ve seen rising unemployment and rising under-employment,” according to Bea Bruske of the Canadian Labour Congress, which has 3 million members out of Canada's 21 million workers. 

The Bank of Canada's three straight quarter-point cuts this year are welcome but the central bank is still moving too slowly, she said. Actions such as a jumbo cut or steeper reductions "would be welcomed by most workers out there," she said. 

BOC Governor Tiff Macklem says he may slow or quicken the pace of cuts based on competing forces like signs inflation will settle down at the 2% target sometime next year because of some slack in the economy, and pockets of upside risk around shelter and some services prices. Officials are expressing less concern around wage gains still running around 5% even as unemployment has climbed by more than a percentage point from near record lows. (See: MNI INTERVIEW: Undershoot Risk Drives BOC Cuts- Ex Adviser)

Assessing inflationary and labor market pressures is tricky with the government ramping up then saying it will slow record immigration and a burst of high-profile strikes and lockouts across the country's railways, airlines and ports. With headline inflation touching 2% in the last CPI report and the Federal Reserve cutting by half a point last week, some investors and economists say the Bank's cut at its next decision Oct. 23 is more likely to be a half-point. (See: MNI BOC WATCH: Third Straight Cut And Signals More Are Coming)

TENTATIVE DEALS REJECTED

Big wage demands are likely to continue but they won't drive inflation because they reflect workers still seeking to catch up with buying power that was damaged when inflation surged through the pandemic, Bruske said. 

“Expectations that workers have right now are exceptionally high, and I think rightfully so,” she said. “The amount of tentative agreements, where both parties may feel that this is a reasonably good collective agreement to take back that is turned down, it’s at an all-time high, which is surprising to me, but it’s the reality.” One example of this trend is over the weekend when CP reported Air Canada's union leader said she will quit if members reject a tentative deal. 

Bruske has long objected to tight monetary policy saying it threatened to push the economy into a needless recession, while Macklem this year has said a narrow path to a soft landing still exists. 

The CLC's demand for the Bank of Canada to switch course was echoed by several provincial premiers during a time when parties of all stripes are courting the union vote that in the past stuck with the left-leaning NDP or Justin Trudeau's Liberals. Pierre Poilievre's Conservatives recently voted for union-backed legislation as they lead in polls ahead of an election due by next fall. “Their overtures are hollow, 100% hollow,” according to Bruske who says they have a longer history of anti-labour stands.

Amid debate around work and immigration, Bruske said the true problem is aligning newcomers with Canada's long-term needs for sustaining the population and filling key healthcare and housing posts. Much of the recent influx has been short-term student visas and temporary permits for low-paid work. “If you’re good enough to work here, you’re good enough to live here, and so we want to see permanent streams of immigration,” Bruske said.