Bank of Canada ends bond buying program, a sign that higher rates are coming

boc rate decision

Canada’s central bank is keeping its benchmark policy interest rate right where it is, but is signalling that higher rates are coming soon.

In its latest policy decision, the Bank of Canada opted Wednesday to hold its benchmark rate steady at 0.25 per cent, the same level it has been throughout the pandemic.

The bank slashed its rate in March 2020 to stimulate the economy by making it as cheap as possible to borrow and invest.

While holding that rate steady, the bank’s statement does make it clear that it’s getting ready to raise that rate sooner rather than later as the economy gets back on to its own two feet and inflation is higher than expected.

“The main forces pushing up prices — higher energy prices and pandemic-related supply bottlenecks — now appear to be stronger and more persistent than expected,” the bank said.

The bank signalled that intention by winding down its so-called quantitative easing program, one that saw the bank buy up as much as $5 billion worth of governments bonds every week to keep lending cheap. 

The bank has slowly wound down the number of bonds it was buying under the program, and on Wednesday announced it would come to an end.

That’s a sign that the bank is getting ready to raise rates. Economists think there could be as many as four rate hikes by the end of next year.

Author: desi123 is an online news portal that aims to provide the latest trendy news for Asians living in Asia and around the World.

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