Quantitative Easing

Bank of Canada plans more quantitative easing and forecasts for the future

OTTAWA, Dec. 15 (Reuters) – A low global interest rate environment means the Bank of Canada will likely have to use tools like foresight and quantitative easing more often to deal with economic shocks, the Bank of Canada said on Wednesday. Governor Tiff Macklem.

Macklem, in a virtual speech to a business audience, said that with the neutral interest rate lower in the world than in the past, central banks have less room to cut rates to deal with crises. . This means that they will have to use other stimuli more often.

“With low global interest rates, the Bank is likely to lower its policy rate to the (effective lower bound) more often in response to shocks. This means that we may need to use forward guidance and our balance sheet more often than has been required in the past, ”he said.

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“These alternative tools work, but we don’t have as much experience using them,” he added.

The Bank of Canada cut its policy rate to its effective lower limit of 0.25% in March 2020, as the coronavirus pandemic took hold. He also launched his first-ever quantitative easing program and said rates would stay low for an extended period.

(Report by Julie Gordon and David Ljunggren)

((Reuters Ottawa office, +1 647 480 7921; [email protected]))

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