The Financial Post reports in its Tuesday, May 4, edition that Bank of Canada Governor Tiff Macklem and Finance Minister Chrystia Freeland are making old-timers nervous.
The Post's Kevin Carmichael writes that the combination of the BOC's loose monetary policy and the federal government's massive spending is echoing the 1960s and 1970s, a period that ended in one of the worst recessions in Canadian history.
The institutional memory of what happened to the economy during those years is getting hazy. The current generation of mandarins are veterans of the Great Recession circa 2009 and the deficit fights of the 1990s. For many, double-digit inflation and interest rates are mythical creatures that exist in textbooks, but are otherwise extinct.
That is why the extraordinary policies that make sense today seem crazy to many of those who have seen double-digit inflation with their own eyes. One of the biggest challenges that Mr. Macklem and Ms. Freeland face over the next few months will be convincing skeptics that they know what they are doing.
Mr. Macklem needs to explain why the BOC intends to keep the benchmark rate near zero even though the consumer price index rose to 2.2 per cent in March.
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