Bank of Canada Governor says monetary policy cannot solve housing affordability problem

Monetary policy cannot solve Canada’s housing affordability problem or boost the country’s longer-term economic growth prospects, Bank of Canada Governor Tiff Macklem said Tuesday in a speech aimed at defining the limits of what central bankers can achieve by setting interest rates. He argued that monetary policy has a good track record of controlling inflation, even if there are times, as in the past few years, when the bank has incorrectly calibrated its response to rising prices.

But central bankers don’t have control over other key economic variables, he told the Montreal Council on Foreign Relations. “Housing affordability is a significant problem in Canada – but not one that can be fixed by raising or lowering interest rates,” Mr. Macklem said, according to the English text of his speech, echoing comments he made to the House of Commons finance committee last week. “Housing supply has fallen short of housing demand for many years. There are many reasons why – zoning restrictions, delays and uncertainties in the approval processes, and shortages of skilled worker

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