Who gets blamed for higher inflation: Chancellor Philip Hammond or Prime Minister Justin Trudeau?
In February, the Bank of England raised interest rates for the first time in more than a decade after a surge in inflation, and a stronger pound after Britain’s vote to leave the European Union.
With the situation weighing on household incomes and hitting savers’ returns, you might think that someone in power would be doing everything possible to rein in that inflation rate.
Not Prime Minister Justin Trudeau, it seems.
The Canadian government recently said it would not cut interest rates despite the higher costs of borrowing since the UK voted to leave the EU in 2016.
Instead, it hiked its pension benefits so that they’d be guaranteed to rise on inflation. And it is now buying electricity from alternative suppliers, to combat rising wholesale prices.
So, who’s to blame?
“Oh my god, would you believe Justin Trudeau?” asked one MP on Question Time, referring to the Canadian prime minister’s Canadian government.
“It’s a perfect example of why this coalition needs to be replaced”, countered another MP.
The argument then inevitably fell back to Mr Hammond, but just how should the prime minister be holding the Bank of England to account?
“Well you’re the guy in charge. You should control what goes on in the Bank of England”, argued Sheila Bond, a former economics adviser to the shadow chancellor.
Justin Trudeau is all about proactive policy, sticking his neck out, and risking his political reputation. Owing a lot to his popularity among some young voters, that sort of behaviour is one way to keep them on side, she explained.
But it seems that this is a habit he doesn’t like very much.
“It’s a terrible idea to put the hot potatoes into the cupboard”, said Ms Bond.
Money and monetary policy is so entrenched in British government that its very name brings to mind statements like: “There is no alternative”, or: “The Bank of England is a creation of the nation.”
So you’d imagine that a prime minister might be resigned to allowing the Bank of England to do what it does – but Justin Trudeau thinks he should be autonomous, giving it the power it needs, and not expecting it to alter course for his own political fortunes.
That’s the contrast.
Maybe it’s a thing of the past when an ageing political leader tries to control the behaviour of the Bank of England; since the financial crisis, we’ve seen a new generation of younger politicians who value the independence of the Bank of England and would rather leave it to play its own free-market game.
After all, this is someone who just didn’t know, didn’t ask, and doesn’t want to know when it comes to interest rates.