–Former Central Banker Calls for Unity to Fight Threat to Canada’s Sovereignty
By Max Sato
(MaceNews) – Canadian Prime Minister Mark Carney is projected to have led his ruling Liberal Party to a slight minority victory in general elections on Monday, defeating the main opposition Conservative Party by promising to build Canada into the strongest economy among the Group of Seven major nations and to protect households and businesses from the fallout of a global trade war.
The Liberals are set to form a fourth consecutive government but remain a minority for the third time following the 2019 and 2021 elections. The Carney administration is expected to garner enough support from other parties to secure parliamentary approval of some bills and the federal budget as most parties agree that Canada needs to upgrade its social infrastructure, provide more affordable housing and increase fiscal spending to help those affected by stiff Trump tariffs and retaliation by U.S. trading partners.
Canadians are also waking up to the call for the need to transform their economy regardless of their political stripes – increasing inter-provincial trade and labor mobility by creating universal standards as well as finding more overseas markets for their goods and services beyond the world’s largest economy.
Carney, 60, won a seat in the suburbs of the capital Ottawa, his first as a member of parliament, after formally entering the Canadian politics only about two months ago. His archrival Pierre Poilievre, 45, leader of the Conservatives since September 2022, lost his seat in the House of Commons that he had held since 2004. Poilievre is likely to stay at the helm at least for now, given that he has successfully guided the party to boost its strength in parliament.
A day after Election Day, the Liberals were either leading or elected in 169 constituencies, just under the 172 majority in the 343-seat lower chamber (up 9 from 160 in 2021), against the 144 seats (up 25 from 119) won by the Conservatives, according to final projections by the public broadcaster CBC and other news media. Elections Canada has also published the same figures.
Their gains came at the cost of smaller parties. Parti Quebecois is projected to have secured 22 seats (down 10 from 32) while the New Democratic Party saw its influence collapse to just seven (down 18 from 25), prompting its leader Jagmeet Singh, who also lost his own seat, to step down. The NDP’s demise came despite its achievements including dental coverage in public health as a partner in Trudeau’s minority government. The Green Party is seen left with just one seat, down from two before the election.
It was a tight race, with the Liberals seen winning 43.7% of the vote vs. 41.3% by the Conservatives, according to Elections Canada.
In his victory speech in the wee hours of Tuesday, the prime minister called for unity in a divided nation to fight off the threat to its sovereignty coming from south of the border as U.S. President Donald Trump has repeatedly labelled Canada as a 51st state.
“Let’s put an end to the division and anger of the past. We are all Canadian and my government will work for and with everyone,” Carney said. “No matter where you live, no matter what language you speak, no matter how you voted, I will always do my best to represent everyone who calls Canada home.”
The Liberal campaign platform has higher fiscal spending, which in turn could raise the federal government’s borrowing costs and put upward pressure on Canadian bond yields and downward pressure on swap spreads over time, according to a BMO report issued Tuesday by Robert Kavcic, senior economist, and Benjamin Reitzes, managing director and Canadian rates and macro strategist.
“The distribution of issuance will determine the impact on the shape of the yield curve, but PM Carney’s separation of the operational and capital budget could mean more long-end issuance (e.g. long-term investment matched by long-term borrowing),” they wrote.
“Increased fiscal stimulus could also stay the Bank of Canada’s hand somewhat,” they projected. “More rate cuts are still likely from the BoC, but the budget will be a factor in determining the depth of those cuts.” BMO is forecasting another 75 basis points of rate cuts by year-end, while the market is pricing around 50 bps.
On April 16, the Bank of Canada maintained its policy interest rate – the target for overnight lending rates – at 2.75% after seven straight rate cuts through March amid exceptionally high uncertainty over growth and inflation sparked by protectionist U.S. trade policy. The bank has delivered a total 225 basis points (2.25 percentage points) in the current easing cycle. Previously, it raised the policy rate by a total of 475 basis points between March 2022 and July 2023, jacking up the key rate through 10 increases from its record low of 0.25% to a 22-year high of 5.0%.
BOC officials remain cautious about predicting their next move, blaming the highly unpredictable nature of what President Trump decides. “We are in a period of very elevated uncertainty,” Governor Tiff Macklem told reporters on April 16. “If that clears, we can be more forward-looking again and certainly if the data is titling in one direction than the other, we can respond decisively,” he said without specifying what can be a decisive move.
Carney, who took over from Justin Trudeau on March 14, has vowed to protect his country from the threat of the global trade war initiated by his U.S. counterpart by exploring for new export markets and seeking a solution that would make both Ottawa and Washington happy. Within weeks, Carney turned fortunes around for the Liberals who had been losing voter support under the Trudeau administration.
A former central bank chief in Canada and the UK who started his career as an investment banker, Carney said at his inaugural news conference last month that his cabinet was ‘focused on things that matter most to Canadians: growing more higher paying jobs, improving affordability and making Canada more secure.” Effective April 1, Carney scrapped a carbon pricing system that consumers had paid since 2019 on fossil fuels, one of his campaign promises. He has also quickly implemented a series of measures to help those impacted by the trade conflict by facilitating unemployment benefit payments, providing a new financing facility for firms and protect retirement savings.
Carney’s predecessor Trudeau announced in early January that he was stepping down as leader of his Liberal Party and the country, a move that had been expected in the face of mounting pressure to quit from both the opposition parties and his own caucus. Trudeau prorogued (suspended) parliament until March 24, which bought his minority government some time to find a new leader who could unite the party ahead of the parliamentary elections.