(Bloomberg) — A group of unions representing more than 3 million employees said it’s “deeply concerned” that the Bank of Canada is encouraging companies to push down wages amid historic inflation that’s hurting workers.
The Canadian Labour Congress, in a toughly worded statement issued Friday, accused the central bank of breaching its agreement with Prime Minister Justin Trudeau’s government. Language on achieving “maximum sustainable employment” was added to the bank’s inflation-targeting mandate when it was renewed at the end of last year.
“By continuing to press for lower wages, the Bank risks overstepping their role of communicating policy and instead takes on the role of business consultant,” Bea Bruske, the labor group’s president, said in the statement. “A strong labor market and Canada’s low unemployment rate needs to be prioritized and preserved.”
Her comments come a week after meeting with Governor Tiff Macklem and his deputies.
The central bank chief raised the ire of the labor movement in July by telling businesses that they shouldn’t plan on inflation staying high. “Don’t build that into wage contracts,” Macklem said at a Canadian Federation of Independent Business event.
With the consumer price index at a four-decade high, the bank flagged the risk of a wage-price spiral that would prompt inflation expectations, wages and prices to ratchet upward at its July policy decision. Such a scenario would result in interest rates having to climb higher than they otherwise would.
The Bank of Canada is in the midst of an aggressive series of rate hikes to bring price pressures to heel and ensure expectations don’t become entrenched. Macklem and his officials have already increased the policy rate by 3 percentage points since March, and are expected to continue hiking through the rest of this year. Markets are fully pricing in another 50 basis-point increase at the bank’s next decision on Oct. 26.
Bruske also raised concerns about the bank’s rapid monetary tightening that could push the economy into a recession and cause “devastating impacts” on workers and their families.
“The prudent thing to do right now would be to slow down interventions designed to slam the brakes on Canada’s economy. The Bank should hold off on further interest rate hikes until we can see the result of the sharp policy actions already undertaken,” she said .
“We must ensure that the medicine is not worse than the disease.”