Quantitative easing of at least $5 billion a week to continue
Central banks pride themselves on their ability to keep their eyes on the horizon, no matter the distraction.
The Bank of Canada stayed true to form on Sept. 9, acknowledging a faster-than-expected rebound from the economic collapse that followed the COVID-19 lockdowns, while sticking to its story that the recovery, ultimately, will still be bumpy and drawn out.
“The bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support,” the central bank said in a revised policy statement. “The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.”
Governor Tiff Macklem and his deputies on the Governing Council left the benchmark lending rate at 0.25 per cent, the lowest setting ever, and restated their commitment to purchase at least $5-billion worth of government bonds per week with newly created money. Those two policies form the core of the central bank’s efforts to keep borrowing costs uncommonly low until the recovery is “well underway.”
Policy-makers reiterated that the benchmark lending rate will remain pinned near zero until the central bank’s two-per-cent inflation target is “sustainably achieved,” an unusually explicit promise meant to give businesses and households confidence that they needn’t worry about a surprise jump in borrowing costs. They added that asset purchases will be “calibrated” to keep market interest rates at levels that “support the recovery and achieve the (Bank of Canada’s) inflation objective.”
“CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term,” the statement said.
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