Bank of Canada's Carolyn Rogers seeks to shore up central bank's credibility amid political attacks

In her first speech since taking the second-in-command post at the country's central bank, Carolyn Rogers re-affirmed the Bank of Canada's independence from the federal government.

Rogers emphasized the importance of trust and credibility in the central bank in a speech before the Women in Capital Markets in Toronto on May 3.

Growth, output, productivity are things that can seem abstract to most people. We can seem a little strange.

She said that mysterious is not what they're aiming for.

The central bank's reputation has come under scrutiny in recent months as politicians such as Pierre Poilievre question its independence and commitment to controlling inflation. Poilievre said last month that he would audit the institution if he became prime minister.

The rate of inflation in Canada ran at its fastest pace in 31 years in March, with a 6.7 per cent reading. Canadians are becoming more upset by the higher costs of everything from gasoline to groceries.

What we’re aiming for is trust

Carolyn Rogers

Rogers said that she welcomes tough questions and scrutiny, adding that she knows that some people are questioning their trust in the organization.

The Bank of Canada Act, created in 1934 to establish the central bank as an independent Crown corporation that sets out its own powers as they relate to monetary policy and financial stability, is a reason the public can trust policymakers to work at arm's length.

The first-ever inflation-targeting agreement in 1991 was one of the notable changes. There is a contract between the central bank and the federal government that gives the central bank the means to achieve a two per cent inflation target.

Volatile inflation through the 1970's and 1980's, which saw inflation whipsawing from six per cent to over 12 per cent, was the reason for establishing this target.

If the finance minister and the governor of the Bank of Canada ever disagreed on monetary policy, the minister would have the power to issue a directive to the central bank that would be tabled in Parliament after receiving approval from the governor and cabinet. Rogers attributed the central bank's track record and the respect governments have put in the institution's independence to the fact that it has never been used.

The bank was put through the test of providing monetary support to the financial system through its quantitative easing program after the COVID-19 Pandemic. The public can follow along with the central bank by viewing the asset purchase programs and balance sheet holdings.

As the country emerges from the worst of the swine flu, the Bank of Canada will try to tame inflation, which governor Macklem recently acknowledged had been underestimated in light of the conflict in Europe.

Rogers said the Russian invasion into Ukraine and commodities rally caught the central bank by surprise. She insisted that the bank was ready to act to bring the economy back to balance and that the public was confident in it.

There is still work to be done. Rogers said the job is not done.

Email: shughes@postmedia.com