The prime minister has correctly said, “When it comes to inflation … it’s very difficult right now because global forces are at play here.”

Inflation isn’t a Canadian problem; it’s a global problem. High oil prices are due to Russia’s war on Ukraine. High gas prices are due to the shutdown of gas refinery plants that never reopened due to the pandemic. Supply chain issues are mostly due to pandemic-related lockdowns in China.

The Bank of Canada’s move to hike interest rates isn’t going to affect any of that. This is the pickle that we’re in: big parts of this aren’t under our direct control.

However, other prices within the CPI are very much under our control. By controlling those prices, we also make Canadians’ lives more affordable. Just like during the start of the pandemic, only government leadership can move us through this phase.

The federal government’s plan to cut child-care fees by 50 per cent this year is a good start. It will more than counterbalance inflationary pressures on families with young children.

But there is plenty more that we could do. Governments also set the limits for rent increases and price tuition, transit fares, long-term care fees, and so on. All of these could be reined in and pull inflation down.

Provincial governments could provide a lifeline to people who receive social assistance by adjusting their payments to inflation, which only Quebec does right now.

Both levels of government could help low-income households with one-time income transfers.

Given the choice, I’m not sure Canadians would choose a recession over government programs that can tackle affordability issues.

Canadian governments didn’t cause inflation, but there’s plenty they can do about it on the fiscal, not monetary, side of the equation.

The harsh reality is that something as academic as the Bank of Canada tinkering with interest rates could result in real people losing their jobs. That’s not an academic exercise. It affects people’s livelihoods and careers, and it impacts household stress in an era of tremendous uncertainty and tumult.

Is a recession in Canada inevitable? If governments otherwise do nothing, probably. Do economists have to rethink monetary policy given the bluntness of interest rates? Absolutely.

Should governments act fast to mitigate the toxic impact of high inflation and high interest rates? Sometimes the only response is a fiscal response.

David Macdonald is a senior economist with the Canadian Centre for Policy Alternatives. He joined the centre in 2011, although he has been a longtime contributor as a research associate. Since 2008, he has co-ordinated the Alternative Federal Budget, which takes a fresh look at the federal budget from a progressive perspective. David has also written on a variety of topics, from Canada’s real estate bubble to Aboriginal income inequality. He is a regular media commentator on national policy issues. He is the author of the report, Picking up the Tab: A complete accounting of federal and provincial COVID-19 measures in 2020.

This content was originally published here.