Independent??

The word independent, as defined by the Webster dictionary reads as follows:

adjective

1. not influenced or controlled by others in matters of opinion, conduct, etc.; thinking or acting for oneself:an independent thinker.
2. not subject to another’s authority or jurisdiction; autonomous; free:an independent businessman.

Over the last 4 days, I have witnessed 4 separate actions that challenge this. For those of you who are not aware, the Bank of Canada – and most central banks in a democracy are supposed to be independent. If we read the definition above, this means they should not be influenced or controlled by others in matters of opinion, think or act for oneself, and not be subject to others authority or jurisdiction.

However, since the start of the Labour Day Weekend we have now witnessed:

1. BC Premier David Eby write a letter to the BOC asking them to stop interest rate hikes.
2. Ontario Premier Doug Ford write a letter to the BOC asking them to stop interest rate hikes.
3. Deputy Prime Minister, and FINANCE MINISTER Chrystia Freeland make comments today about the BOC pause, and how it was ” welcome relief for Canadians” , and ” My number one priority is to use all tools at my disposal, and to work with partners at other levels of governments across Canada, to ensure interest rates come down as soon as possible”.
4. Poland’s Central bank CUT rates today by 75 bps ( ironically enough with about 5 weeks until the election in Poland, all while inflation is still running around 10% )

In 4 days we have witnessed major political interference with central banks, which are supposed to be independent. The BOC has a mandate to control inflation at a 2% target. That is it, and that is all. It is not to cow tow to Premiers of provinces, it is not to work or collaborate with the governing federal party, and there should be no undue pressure or stress applied from ANY political party, political leader, or political group to influence the decision.

How does Tiff and Co. move forward knowing that political pressure is going to be applied? How does the interference play with the next move from the BOC?

While none of us like to see interest rates increased, the BOC is doing their job. The job of our central bank is to basically take away the punch bowl when the party gets good. Now, to be fair, they showed up late to this party, and the entire crowd was already intoxicated on cheap money, but they are now doing their job – which is to save us from ourselves. The job they are supposed to do may be inconvenient for some politicians – but quite frankly – Too Fucking Bad!!! I refuse to have my financial future manipulated so some premier, or some Prime Minister can win re election.

Ironically enough, one of the main reasons higher interest rates were needed, was because these exact same politicians spent like drunken sailors on shore leave. Do you think printing 500 BILLION dollars of money in 2,5 years added to inflation? Do you think paying people to stay home with COVID added to inflation? Do you think that hiking immigration targets over 1 million a year helped?

Of course, this is politicians doing what politicians do best – pandering to the theme of the day. I really hope Tiff and Co. stand their ground, and do what needs to be done to tame inflation for the cycle. If they are at all intimidated and back down, it could be a decade or more of problems on the inflation front.