MNI POLICY: Panel to Quiz BOC's Macklem on Market Stability

By Greg Quinn

     OTTAWA (MNI) - Canada's House of Commons Finance Committee Chair said BOC

Governor Tiff Macklem's public debut Tuesday will update lawmakers on

stabilizing markets and coordinating stimulus while leaving questions about

record debt burdens until Covid-19 passes.

     Bank of Canada asset purchases and near-zero interest rates are working to

keep credit flowing, though some members have questioned the dangers from such

large flows of money, Wayne Easter told MNI in a phone interview.

     "What members of the committee will be looking for is, is Mr. Macklem the

right guy to ensure that we maintain a stable financial system that we have had

in place over time," Easter said. Macklem's experience as a former top BOC

deputy followed by running the University of Toronto's business school means

he's ready, Easter said.

     "We are definitely providing liquidity but that actually goes some distance

to stabilize the financial system within Canada and allows the banks to provide

more capital to those that are going through some difficult times with Covid-19

and the business shutdown," Easter said.

     Macklem took over from Stephen Poloz who retired on June 2, leaving a 0.25%

policy rate and a balance sheet that has now grown to more than 20% of Q1 GDP,

policies Macklem endorsed when he was confirmed in the job by the federal

cabinet.

     --COORDINATION KEY

     The BOC has moved to buy up to CAD50 billion of provincial government bonds

and CAD10 billion of corporate bonds, and affirmed at least CAD5 billion a week

in federal bond purchases. There doesn't appear to be any immediate need for a

policy tweak, Easter said, adding "we will see after we listen to him."

     Coordination between the BOC, other agencies and the G7 has been smooth and

lawmakers may also seek an update there, Easter said. "That's important, we need

to know where the new Governor stands," he said. Joint action among central

banks on issues like climate change and global antiracism protests is the best

way for the BOC to advance, he said.

     Easter is a member of the governing Liberal Party and some businesses from

his district in Prince Edward Island are complaining about high borrowing rates.

"Some of that is legitimate, I think some of it is overblown," he said. The

province is known for fishing and farming and seasonal workers are worried about

a sudden cut-off of government supports, he said.

     Covid-19 has added to a longer surge in debts held by consumers, businesses

and government, Easter said, but emergency measures take priority at Tuesday's

hearing.

     "Consumer debt, there's no question it is an issue, but there are other

overriding issues at the moment," he said. "What is going to help us all get out

of this is to strengthen our economy."

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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