Canada's central bank appears more concerned with job creation than about inflation

"There are three issues," the man who would become Prime Minister Brian Mulroney told a roaring crowd in Nova Scotia 38 years ago. "The first is jobs, the second is jobs, and the third is jobs."

After a decade fighting inflation and the high interest rates that required, the focus on "jobs, jobs, jobs" took Mulroney and his Progressive Conservative Party to a sweeping victory over the Liberals in the next year's election.

Nearly four decades later, the Bank of Canada — and very likely Finance Minister Chrystia Freeland in her fiscal update next week — appear to agree that jobs and the economy are more important to Canadians than their fear of inflation.

"It's largely a good news story for many Canadians — many Canadians are getting jobs," said Bank of Canada deputy governor Toni Gravelle, presenting the central bank's economic progress report on Thursday to the Surrey Board of Trade in B.C.

"And them having jobs and incomes means there's more demand for all the goods and all the businesses out there."

Gravelle's comments came in the context of an imminent decision by the federal government to renew the authority of the central bank to hold inflation within a target range by either raising or cutting interest rates.

Some analysts have said the fact that the government has delayed the decision so close to the January 2022 deadline, when the old mandate runs out, means the Liberals are considering making changes.

One possibility is that it could move toward U.S. rules, or the so-called dual mandate, which declares the central bank there must consider both the employment rate and inflation in making its interest rate decisions.

Critics fear such a move could confuse markets.

And the longer inflation is allowed to run hot, the more likely wage-earners and businesses would expect inflation to continue, thus pushing wages and prices even higher — something Gravelle said he wanted to avoid.

When asked directly by reporters whether the new mandate would include a provision on jobs, and whether there had been any disagreement between the bank and the government, Gravelle smiled and refused to be drawn.

But he did say that employment had become an important consideration in recent bank thinking.

"I won't speak to the mandate question at all. I just wanted to highlight that in terms of our labour market discussions, it's not really new that we talk about labour markets," said Gravelle.

"I think the new part, in some respects, is that we're looking at a vast array of indicators given that this … pandemic is quite unique and has generated a kind of a complex recovery — one that we've never seen before."