Interest rates

Bank of Canada ends quantitative easing, leaves interest rates unchanged – Saanich News

The Bank of Canada is not yet ready to raise interest rates, but the central bank decided to end quantitative easing on Wednesday (October 27).

During much of the pandemic, the central bank injected stimulus into the economy through quantitative easing, buying billions of dollars in federal government bonds to keep interest rates low. This new move will see the bank stop buying new bonds, except to replace existing assets that are maturing.

The Bank of Canada’s interest rate remains at 0.25%. However, the bank has signaled that interest rates could rise in the second half of 2022. Bank of Canada Governor Tiff Macklem has been pressured to raise interest rates to avoid inflation, but rising interest rates may limit Canada’s economic growth.

Macklem highlighted strong job growth in recent months and high vaccination rates to boost Canada’s economic recovery, but noted that the employment rate in low-wage sectors continues to be at the bottom. dragged.

Meanwhile, inflationary pressures are driven by bottlenecks in supply chains, as well as rising global energy costs. Macklem said the inflation problems are more stubborn than the bank originally anticipated.

“We know that higher prices are difficult for Canadians, which makes it more difficult for them to cover their bills. I want to assure you that inflation is not going to stay as high as it is today, although it will take a little longer to come down. “

Moshe Lander, professor of economics at Concordia University, said the best thing the Bank of Canada can do to contain inflation is nothing.

“Whatever the political stance of the bank, it is going to hurt to some extent. The best thing here is to do nothing and let the inflation subside. “

Lander said the most recent central bank move is a signal that the Canadian economy is recovering from the pandemic, but Canada still has a lot of ground to catch up.

“Until we close this field, we have to make up for lost time. We will tolerate some inflation and policies that we would not normally allow until we have returned to a point where we can say we have been through the worst and are ready to go back to business as usual. “

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economic growth inflation