Questions on inflation, jobs and housing reveal U.S. concerns on Canadian recovery

Tiff Macklem faced some tough questioning yesterday, as members of the U.S. Council on Foreign Relations grilled the Bank of Canada governor on whether their northern neighbour would have a trouble-free exit from the downturn of the COVID-19 pandemic.

Led by financier and former Democratic politician Roger Altman, members of the U.S. think-tank asked probing questions on whether Canada's housing bubble would have any spillover effects on the global economy, as well as on jobs, inflation, commodity pricing and the difficulty of moving from a low interest rate regime to one without monetary stimulus.

To Canadians who have heard Macklem's views in the past, the answers were in some ways less revealing than the questions. But among the new things he did pass on were fears that inflation could well turn out to be more long-lasting than expected and jobs recovery could be slower.

On the topic of inflation, Macklem responded to a question that conveyed a growing concern in the financial community that inflation was not a blip, but rather a trend.

"A lot of people in finance are learning that the most important word in the English language is 'transitory,'" quipped Altman, referring to the term repeatedly used by central bankers to imply that inflation would go away on its own.

"How confident are you that it really is transitory, because if you took a poll of smart people in finance … you'd probably get 50 per cent saying it probably is and 50 per cent saying it probably isn't," said Altman.

"It's the job of central banks to say it is," responded Macklem in a similarly humorous tone.