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Bank of Canada reviewing extraordinary actions taken during pandemic

Published 2024-06-13, 12:46 p/m
© Reuters. A pedestrian walks past the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie/File Photo

By Promit Mukherjee and David Ljunggren

OTTAWA, June 13 (Reuters) - The Bank of Canada is reviewing the extraordinary actions it took during the pandemic to stimulate the economy, in an effort to be better prepared for a future crisis, a top executive said on Thursday.

The BoC, like several of its counterparts globally, ramped up its purchase of government bonds to pump money into the system, a policy known as quantitative easing. It also engaged in "extraordinary forward guidance", giving markets an idea of how long rates would stay low.

"It is important to take a step back and learn from the experience. That way we can sharpen our response for the next crisis," Deputy Governor Sharon Kozicki told a conference in Ottawa, saying the policies had worked.

Last week the BoC became the first central bank among the G7 nations to cut its benchmark rate, lowering it by 25 basis points to 4.75%.

Kozicki reiterated the bank's messaging that if inflation continued to ease, further cuts would follow, but said the bank would take its decisions one meeting at a time.

The bank is now removing liquidity from the system by letting bonds roll off its books, shrinking the size of its balance sheet which grew during QE, a policy known as quantitative tightening.

Kozicki repeated that the bank aimed to end QT at some point next year.

The review, which will be assessed by external experts, is due to be released early next year. It will also help in making the bank more accountable and transparent, she said.

Quantitative easing was employed by the bank for the first time during the pandemic and "the bar for us to use QE again is very high", she said.

© Reuters. A pedestrian walks past the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie/File Photo

 

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