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Steven Globerman is a senior fellow at the Fraser Institute.

Back in 2020, Conservative MP Pierre Poilievre accused the Bank of Canada of being an “ATM” for the Liberal government and its deficit spending, helping fuel inflation. Mr. Poilievre, now leader of his party, has also said if he’s elected prime minister, he’ll replace Tiff Macklem as governor of the central bank with someone who would reinstate the institution’s low-inflation mandate. And he’s promised to increase parliamentary oversight of the bank.

In response, Mr. Macklem defended the Bank of Canada’s decision to deploy quantitative easing to buy government bonds and other assets because financial markets at the onset of the COVID-19 pandemic were “frozen” – making it difficult for organizations, particularly small businesses, to raise capital.

So who’s right?

Clearly, particularly early in the pandemic, economic uncertainty, spurred by government panic, encouraged financial institutions, businesses and households to hoard cash, which in turn threatened a liquidity crisis. While maintaining economic and social restrictions, Ottawa (and governments across the country) stepped in with a variety of financial-support programs designed to protect jobs, backstop corporate and household debt, and fight the pandemic.

At that point, Mr. Macklem and his advisers faced a choice: either purchase a large portion of government debt issued to pay for COVID relief programs (CERB, for example), or essentially force Ottawa to sell the debt in private capital markets. Given the demand to hoard cash in the private sector, the interest rates the federal government would have faced to fund newly issued debt would have skyrocketed, thus threatening the financial viability of many businesses and households.

So the Bank of Canada, of course, chose to finance Ottawa’s borrowing, in part to prevent deflation (a decline in the average price level), which would have violated its mandate to keep inflation within a range of 1 per cent to 3 per cent annually. In retrospect, however, it’s easy to say the central bank provided an excessive amount of liquidity to the economy as exemplified by the 250-per-cent increase in the country’s narrowly defined money supply (known as M1+) in 2020. Indeed, officials of the bank acknowledge it underestimated the inflationary effects of its actions.

Moreover, had the federal government been required to fund a larger portion of its COVID-related debt through private capital markets, its income support and transfer programs may have been more modest, which would arguably have been a wiser course of action. However, while the central bank has acknowledged mistakes in its monetary-policy management of the COVID crisis, Ottawa has yet to admit it may have mismanaged its fiscal response to the crisis.

So what does this mean going forward?

In the event of future “black swan” crises, fiscal-policy mismanagement is a greater concern than monetary-policy mismanagement. Politicians operate with a shorter time horizon than an independent central bank and are more inclined to minimize the adverse conditions voters might experience from sharp and unexpected declines in economic activity. Central bankers, meanwhile, should be more focused on the long run, especially as they influence inflation expectations.

It’s clear the COVID experience has strengthened the case for central-bank independence. It might be the last line of defense against fiscal overreactions to real or imagined crises.