OTTAWA (Reuters) - The Canadian government wasn’t consulted on this week’s surprise decision by the central bank to cut interest rates but it understands the bank’s rationale in making the move, Finance Minister Joe Oliver said in an interview published Friday.
“The Bank of Canada took its decision to lower its overnight lending rate without consulting us,” Oliver told French-language daily La Presse.
He also said in the interview that the bank’s governor, Stephen Poloz, has publicly explained that the rate cut, announced on Wednesday, is designed to act as an insurance policy to mitigate the negative impact of lower oil prices on the economy of Canada, a major oil-producing nation.
No major forecaster had expected the cut, which stunned markets.
Analysts have said that by stimulating the economy and lowering the government’s debt costs, the rate cut could help Conservative Prime Minister Stephen Harper keep a promise to balance the budget ahead of October’s federal election. Polls show the Conservatives face a tough election race with the opposition Liberals.
The Bank of Canada has been effectively independent of government control for decades. It is responsible for administrating day-to-day monetary policy based on an inflation-control target that is set jointly with the federal government.
Asked about the La Presse article, Oliver’s spokeswoman Melissa Lantsman said the minister’s office doesn’t disclose private conversations with the central bank.
“Monetary policy is in the purview of the BoC. The BoC makes their decisions independent of the government,” she said.
Reporting By Mike De Souza; Editing by Jeffrey Hodgson; and Peter Galloway