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New report urges rate hike pause to save workers’ jobs

An economic report from Canadian Labour Congress and the Centre for Future Work proposes alternatives to a monetary policy-induced recession.

Ottawa (20 Oct. 2022) — A new economic report outlining the risks of the Bank of Canada’s single-minded pursuit of Canada’s inflation target through higher interest rates was released today by the Canadian Labour Congress (CLC) and the Centre for Future Work.

Labour unions show alternatives to Bank of Canada to deal with high inflation

The report, A Cure Worse than the Disease? Toward a More Balanced Understanding of Inflation and What to Do About It, explains the shortcomings of the Bank of Canada’s interest rate hikes and explores the economic costs of a recession. The paper concludes by proposing policy alternatives for the Bank of Canada and the government to adopt in response to high inflation.

“We appear to be using a decades-old monetary policy textbook to solve 2022’s economic crisis. The Bank of Canada has already raised rates 5 times this year. No G7 country has raised them faster or further,” said Bea Bruske, President of the CLC. “Moving stubbornly ahead with even more hikes, before gauging the full effects of measures already taken, risks a damaging recession that would make things much worse. We need a pause to save Canadian jobs.”

Government has a role to play to help mitigate impact of inflation 

The report, authored by Jim Stanford, Director of the Centre for Future Work Director, takes on bad-faith narratives around the causes of inflation, summarizes the current economic challenges facing Canadian policy makers and looks at the real toll a recession would take on workers and families.

“A recession would mean higher unemployment, lost incomes, reduced output, larger deficits, wasted capacity and destroyed lives,” explained Stanford. “The current approach of monetary austerity simply doesn’t account for the economic challenges we face today. Instead of throwing the economy into a dangerous recession just to prove we’re tough on inflation, we should take a more open-minded approach and respond with measures targeted to the real causes of today’s inflation crisis.”

Bruske added that governments also have critical roles to play in helping to mitigate the impact of the inflation crisis on people and addressing its real causes, including supply disruptions, a global energy price shock and companies raising prices to what the market can bear.

“A policy-induced recession now will make things even worse, with precarious and low-wage workers — in particular women, Indigenous, racialized, and recent immigrant workers — hit the hardest,” warned Bruske. “But government can help through fiscal, labour market, and social policy measures that blunt the impact on vulnerable families.”

“Let’s embrace alternative approaches that put the well-being of people at the heart of our nation’s monetary and fiscal policies,” concluded Bruske.