Economic conditions are there to support a rate cut, Freeland says

“Inflation has come down to its lowest point in three years,” she said. “That is real progress”

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Inflation has declined to the lowest point in three years, and the federal government has created the economic conditions that would allow the Bank of Canada to cut interest rates when it meets next week on June 5, says Deputy Prime Minister Chrystia Freeland.

“We, the government, as the part of the Canadian financial system in charge of federal fiscal policy, have been very mindful of acting in such a way that would create conditions that support the decline in inflation, that support creating conditions that would make it possible for the Bank (of Canada) to act to bring interest rates down,” she said on Tuesday while providing an update on the federal government’s economic plan.

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Asked if declining inflation and other factors support a rate cut, she described the question as one that “touches the central preoccupation” of many Canadians.

“For four months in a row, we’ve seen encouraging inflation numbers; (and) for four months in a row, inflation has been within the Bank of Canada’s target range, and the latest inflation number of 2.7 per cent in April shows inflation has come down to its lowest point in three years,” she said. “That is real progress.”

Freeland added that central bank governor Tiff Macklem has said that federal fiscal policies in the fall economic statement and the latest federal budget were helpful.

“We’ve been conscious of our side of things,” she said.

But she stopped short of advising the Bank of Canada to cut rates, noting that Canada has an independent central bank and “that has served us well.”

Much of the press conference, which featured Industry Minister François-Philippe Champagne and Anita Anand, president of the Treasury Board, focused on other issues such as tax incentives introduced in the budget and foreign investments in Canada in recent years.

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But Freeland also said Joe Biden’s recent announcement to introduce sweeping tariffs against China, including key parts of the electric-vehicle supply chain, were the subject of much discussion when she visited Italy last week for a meeting of G7 finance ministers and central bank governors.

She said Champagne has been using tools to screen Chinese investment in Canada, referring to the Investment Canada Act that allows for review of foreign investments that could harm the country’s economy  She added that Canada has “tariffs” in place against China and that it would monitor the situation carefully to ensure the country does not become a backdoor for China to ship products into the United States.

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Freeland also had some harsh words for China, saying it has “an intentional, state-directed economic policy, which is leading to overcapacity and oversupply in specific sectors,” specifically citing aluminum, steel, critical minerals and other manufacturing sectors.

“That is not playing by the rules,” she said, “and at a time when it is so important for us in Canada to be supporting this industrial transformation, we cannot let Canadian industry be wiped out by Chinese oversupply and overcapacity.”

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