Bank of Canada pushes back on question of independence

By Andrea Hopkins
WASHINGTON, April 16 (Reuters) - Bank of Canada Governor
Stephen Poloz pushed back on Saturday at the suggestion the
central bank had accepted economic assumptions from the
Department of Finance without doing due diligence about Finance
Minister Bill Morneau's budget.
"It might be worth spending a couple minutes on the question
of fiscal multipliers because it is a fairly technical thing,
and if you want to understand it better, I'm happy to do it. We
didn't spend enough time on it (on Wednesday)," Poloz told
reporters on the sidelines of the International Monetary Fund
meeting in Washington.
He explained that the models used by economists to project
how much return on investment the economy will get from the
government's infrastructure spending or a tax cut for families
will depend on the starting point of the economic cycle.
A bigger boost is expected from direct investment like
infrastructure spending, and a smaller one from tax measures
because of the uncertainty around consumer spending, Poloz
explained.
He also said that fiscal stimulus will have "a bigger oomph"
at this point in the economic cycle than monetary policy,
because official interest rates are already so low.
Ultimately, however, the central bank and the federal
government's expectations for the multiplier effect of the
budget stimulus were the same, within decimal points, he said.
Poloz took exception on Wednesday to comments by a private
sector economist that the bank had relied on the Finance
Department's budget numbers rather than crunching its own
numbers because Morneau is his boss.
"The Finance Minister, I'm sorry, is not my boss. The Bank
of Canada is a fully independent policymaker," he told a news
conference. "I can tell you that, if for some reason, we were in
total disagreement with some of the analysis that was in the
budget, we would say so in our analysis."