The Globe and Mail reports in its Friday, Sept. 10, edition that the Bank of Canada is signalling a possible cut in government bond purchases in October. The Globe's Mark Rendell writes that Governor Tiff Macklem says the BOC expects to start raising interest rates before it entirely winds down its quantitative easing program or QE.
In a Thursday speech, Mr. Macklem said the bank is approaching the "reinvestment phase" of its federal government bond buying program. Since the start of the pandemic, the bank has been buying billions of dollars worth of government bonds every week in an attempt to lower yields on benchmark bonds and bring down borrowing costs across the economy.
When the bank arrives at the "reinvestment phase," it will try to match its weekly bond purchases to the pace at which bonds it already owns are maturing -- effectively stabilizing the size of the bank's balance sheet. Mr. Macklem said that will require buying between $4-billion and $5-billion worth of government bonds a month, down from about $2-billion a week.
He said that once its asset purchases are stabilized, the BOC may look to raise interest rates before further reducing the pace of bond buying.
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