New spending to ease the central bank's policy burden by supporting low-income workers and waiving student loan interest fees
Canadian Finance Minister Chrystia Freeland has announced a raft of new spending that would, among others, ensure support for low-income workers and waive interest fees for student loans – a move that comes amid the central bank’s attempts to tame inflation.
Freeland said that approximately $11.3 billion will be deployed over 2022 and 2023.
This is on top of the $11.6 billion in supplementary spending already announced since the annual budget was unveiled in April 2022.
Through the fiscal plan, Freeland assured that the federal government will help ease some of the Bank of Canada’s burden.
“We know how important it is right now… not to pour fuel on the flames of inflation,” Freeland said. “We really don’t want to make the central bank’s job harder.”
Read more: BoC’s Macklem: Rate hikes nearing end, but consumer pain ahead
In its latest meeting last month, the BoC raised its benchmark policy rate by 50 basis points to 3.75%, despite headline inflation having moderated from 8.1% in June to 6.9% in September.
“We don’t want to put the Bank of Canada in a position where it has to raise rates higher and keep them there for longer,” Freeland said. “We need to strike a balance today between, on the one hand, being fiscally responsible, keeping our powder dry, given the global economic uncertainty and, on the other hand, being compassionate, providing support to those people who need it.”
The Liberal administration is expected to benefit from a windfall, as it cut its deficit forecast for fiscal year 2022 to $36.4 billion, significantly lower than its initial prediction of $52.8 billion in April.
