Chinese Communist Party leadership candidate Pierre Poiliver has criticized the Bank of Canada and Mr McClem during the COVID-19 pandemic for their handling of inflation. (Photo: The Canadian Press)
During the Conservative Party leadership debate, held on Wednesday in Edmonton, candidate Pierre Boliever said he would fire Bank of Canada Governor Teff McClem if he was elected prime minister.
Mr Poilievre has criticized the Bank of Canada and Mr Maclem throughout the COVID-19 pandemic, particularly for its handling of inflation. He also claimed that he will conduct a review of the Bank of Canada and terminate plans for his digital currency.
“It is not the bank’s role to comment on political discussions,” Bank of Canada spokesman Paul Badercher said Thursday in response to Boliver’s comments. “Governor Maclem has been appointed by the Board of Directors of the Bank with the consent of the Governor in the Board for a period of seven years and his term will continue until June 2027.”
However, this is not the first time that tensions have arisen between politicians and the Bank of Canada. A 1959–61 dispute between the Conservative government of Prime Minister John Dieffenbacher and Bank of Canada Governor James Quinn eventually led to Mr. Quinn’s resignation and increased central bank independence.
When was the Bank of Canada created?
The bank was incorporated in 1934 under the Bank of Canada Act, largely in response to the Great Depression, and opened in 1935.
It is the central bank of Canada, like the Federal Reserve in the United States and the Bank of England in the United Kingdom.
What does the Bank of Canada do?
It is responsible for setting Canada’s monetary policy, managing the country’s money supply and keeping inflation low and stable. The central bank’s mandate, which is reviewed every five years, is to keep inflation between 1.0% and 3.0%.
His other responsibilities include ensuring the integrity and efficiency of the Canadian financial system, designing and issuing Canadian banknotes, and lending money to Canadian financial institutions. It is designed to be independent of the current government.
What is the relationship between the Bank of Canada and the federal government?
The Bank manages the government’s foreign exchange reserves and public debt programmes.
Trevor Tombe, a professor of economics at the University of Calgary, adds that the Treasury Secretary is empowered to issue explicit orders regarding monetary policy, although this has never happened in practice.
Who appoints the Governor of the Bank of Canada?
The governor is appointed by the board of directors of the central bank. Although the Deputy Minister of Finance is a member of the Board of Directors, he has no role in the voting process. The term of office is seven years, subject to renewal.
How is the Bank of Canada different from the Federal Government’s Ministry of Finance and the Minister of Finance?
The Minister of Finance is responsible for fiscal policy.
“This is much broader and includes government taxation, program spending, regulatory policies, and so on,” Tumbe says. The minister is responsible for the vast majority of what we consider the government’s fiscal policy.”
How has the role of the Bank of Canada evolved?
Mr. Tombe explains that the central bank has always been in charge of monetary policy, but the way it formulates it, as well as its objectives, has changed.
“Our current approach to inflation targeting began in 1991 and is generally considered a great success,” he says.
Can the Federal Government Fire the Governor of the Bank of Canada?
Mr Tompey says the federal government can in fact fire the Bank of Canada governor, but the process is difficult to test, because there is no mechanism for that, other than the passage of a bill through Parliament, which occurred in the feud with Mr Quinn.
In 1961, the Government of Canada introduced a bill that would remove then-Governor James Quinn. Although the bill passed in the House of Representatives, it failed in the Senate. Mr. Quinn eventually resigned.
Mr Tumbe says it is the only time the government has openly tried to impeach a ruler.
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