Bank of Canada makes its biggest key interest rate hike in 20 years

Politics Insider for April 14: The BoC’s big rate hike; Pierre Poilievre’s big rallies; and some tough housing questions

Bank of Canada Governor Tiff Macklem listens to a question from a reporter during a news conference following a rate announcement, April 13, 2022 in Ottawa. (Adrian Wyld/The Canadian Press)

Bank of Canada Governor Tiff Macklem listens to a question from a reporter during a news conference following a rate announcement, April 13, 2022 in Ottawa. (Adrian Wyld/The Canadian Press)

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The Bank of Canada has raised its key interest rate by the highest amount in more than 20 years and warns more rate hikes are coming, CP reports.

Governor Tiff Macklem said inflation is too high: “The invasion of Ukraine has driven up the prices of energy and other commodities, and the war is further disrupting global supply chains. We are also concerned about the broadening of price pressures in Canada.”

The bank hiked its policy interest rate by half a percentage point on Wednesday to one per cent. The last time it raised its key interest rate by half a percentage point was May 2000.

Unpredictable: In the Star, Heather Scoffield writes that it is anyone’s guess how the economy will respond to the increased rate.

No one really knows how the housing market will react to a steep increase in interest rates. Some people used their pandemic savings to pay down their debts, and they’re in good shape. Others used their windfalls to jump into the housing market or to upsize, perhaps getting in over their heads. No one really knows how the Canadian dollar will react to rates rising here and elsewhere even as commodity prices climb. So far, the loonie hasn’t seen its traditional bounce, and that means imports aren’t as cheap as we could once count on.

And no one knows if the public will buy the story that the central bank has this all under control and we’ll be back to normal in two years. It doesn’t help that the front-runner for leader of the Official Opposition is actively taking a run at the bank’s — and Macklem’s — credibility and integrity.

Big rally: Speaking of  Pierre Poilievre, the presumptive CPC frontrunner was in Calgary on Tuesday night, where he drew more than 5,000 people, the Calgary Herald reports, which is a lot of people for a campaign rally.

Budget help? In Laval, Justin Trudeau said that measures in the recent budget will help Canadians cope with higher interest rates, CP reports.

The G word: At the same newser, Trudeau said it’s “absolutely right” that more people are using the word genocide to describe Russia’s actions in Ukraine, although he didn’t use the word himself, CBC reports.

Boomers vs millennials: In the Globe, Robyn Urback writes that Poilievre is “onto something” when he promises to remove barriers to housing, although she notes that he doesn’t have specific proposals to change anything, for good political reason.

Mr. Poilievre has only pledged to reduce the application costs of zoning changes, or the “governmental cost associated with building things.” There is a reason for his reticence, of course: Mr. Poilievre does not want to alienate existing homeowners who would be remiss to see the value of their nest-egg suddenly plunge when a new fourplex is built next door. It’s the same dance politicians always play over housing: try to placate the millennials with words, studies and maybe some cash, but make sure the boomers – who are more reliable voters and donors – stay happy in their $4-million, structurally compromised bungalows.

Not shelter: In the Line, Jen Gerson makes a similar point.

Houses aren’t places to live. They’re an investment. They don’t exist to actually shelter people from the cold, they exist to juice the economy and keep the elderly afloat on paper gains well into their retirement years. The shelter part is incidental. You could live in a cardboard box in certain lots in Vancouver and be a millionaire on paper. It’s all the same to the bank and the government. And as long as this parasitic industry in this youth-crushing country can convince you that you, too, can get rich beyond your wildest expectations simply by working hard, saving up, buying a house, and paying off a mortgage well into your golfing years, the grift isn’t going to stop.

Sweet spot: In the Globe, Andrew Coyne observes that politicians don’t actually want to reduce the price of housing, because that’s bad for people who own housing.

It tends to be forgotten in most reporting on the issue, but high and rising home prices have many more beneficiaries than victims: the two-thirds of Canadian households that own their own home, versus the fraction of the remainder that would prefer to own than rent. If you think rising prices are a hot political issue, just wait until mortgage rates rise, prices start to fall, and over-leveraged homeowners find themselves under water. For the practising politician, then, the sweet spot is to be seen to be doing something to reduce house prices, without actually reducing them.

Landlords at the table: Speaking of people who own housing, Amanda Connolly of Global has an interesting story  pointing out that about a third of the federal cabinet own rental units.

Harper vs. Charest: In the Globe, Campbell Clark has an interesting column on the CPC leadership race, using a tweet from Ben Harper to point to the bad blood that may still exist between Harper’s dad and Jean Charest, a subplot worth watching in the current race.

Bad poll for Charest: Leger has a new poll on potential matchups that show Charest struggling to connect.

Good poll for Poilievre: A poll from Abacus finds about half of Canadians polled agree with the message in Poilievre’s launch video.

No tests: Ottawa paid $20 million for COVID-19 tests from an Ottawa company that it never received because they never worked as promised, the Post reports. PHAC is writing off the money as a loss.

In contempt: Former Alberta justice minister Jonathan Denis was found in contempt of court for threatening to sue the province’s former chief medical examiner during a civil trial, CP reports.

Justice Doreen Sulyma ruled Wednesday that a letter sent last week on behalf of Denis was an attempt to intimidate Dr. Anny Sauvageau. Sauvageau is suing the province for $7.6 million in lost wages and benefits after her contract was not renewed in 2014.

Looks like a pattern: In the Calgary Herald, Don Braid notes, incredulously, that three recent Alberta justice ministers are in trouble.

Tribute: In the Vancouver SunVaughn Palmer has a touching tribute to longtime B.C. columnist Jim Hume, who died Wednesday aged 98. Take the time to read it.

— Stephen Maher