(Ottawa) A senior Bank of Canada official says the unusual measures it took during the pandemic helped stimulate the economy, but it will take a major event to return to quantitative easing.
The comments were made in a speech in Ottawa to the Canadian Association of Business Economics (CABE), as the central bank strives to restore public confidence and be transparent in its operations.
With the key interest rate already as low as it could be in 2020, Deputy Governor Sharon Kozicki said the central bank decided to start buying more government bonds than usual in the aim of keeping interest rates low – a practice known as quantitative easing.
It was the first time the central bank used quantitative easing and only the second time it used forward guidance – signaling that interest rates will remain low until certain economic conditions are met – to help the economy (the first time was during the financial crisis).
But Kozicki stressed that the bank faced an unprecedented economic shock when it decided to resort to quantitative easing, highlighting the unusual nature of the decision.
“So it will take a major event to get back there,” she said.
Kozicki said the central bank is preparing a thorough review of decisions made during the pandemic so it can learn lessons from its own actions.
“While a milestone, this review is not the final link,” she said.
“Questions remain and they could influence the conditions of use of our exceptional measures in the future. These questions are particularly instructive in a world where the next crisis could be different from crises of the past,” she added.
The Bank of Canada cut its key interest rate last week by a quarter of a percentage point to 4.75 per cent. The bank said if inflation continued to slow, it was reasonable to expect further cuts, but that it was taking one decision at a time.
The summary of the central bank’s deliberations on its decision to cut its policy rate is expected to be released on June 19.
