Bank of Canada bond-buying program faces misconceptions, deputy governor says

Bank of Canada bond-buying program faces misconceptions, deputy governor says
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A deputy governor of the Bank of Canada says its low borrowing rates are not designed to provide a free lunch for the government, calling the idea a misconception.

Paul Beaudry says the bank’s recent bond-buying program is not the equivalent of printing money or underwriting government debt at no cost, but rather a way to keep borrowing costs in check and support households and businesses in the wake of the COVID-19 pandemic.

The central bank has purchased a little more than $180 billion in Government of Canada bonds since March, and on Wednesday said it would continue to buy $4 billion in bonds per week, down from $5 billion a week at the start of the COVID-19 pandemic.

Beaudry says the Bank of Canada’s decision to buy the bonds is a way to keep long-term borrowing costs low, on top of its decision to dampen short-term borrowing costs by keeping its key interest rate at 0.25 per cent.

Going forward, Beaudry says the Bank of Canada is prepared for the economy to either take a more persistent turn for the worst, or for an upside scenario where a COVID-19 vaccine rolls out quickly.

Beaudry says Canadians should rest assured that the bank’s policy-makers will not overuse the bond-buying policy and will keep inflation from pushing prices higher.

This report by The Canadian Press was first published Dec. 10, 2020.

The Canadian Press

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