MNI BRIEF: BOC's Macklem Says QE Was Nothing Special

Governor Tiff Macklem said there was nothing special about hundreds of billions of dollars of federal bonds the BOC purchased during the Covid pandemic, saying the country's first use of QE was another part of a toolkit deployed to boost the economy.

QE was used as interest rates were cut to about zero and other tools such as forward guidance were deployed, he told a Senate banking committee hearing Tuesday night. “Many central banks around the world used QE, and we all did it for the same reason,” he said. “There’s nothing that special about QE,” Macklem said, “it’s just part of the way we lowered interest rates.” He bristled at a follow-up comment about growing the money supply, pausing and then telling a Senator: “Can you give me a question?”

The Bank's assets grew to CAD575 billion from CAD125 billion during the pandemic. Macklem noted the bank has shifted to QT and earlier this year he estimated that slims the balance sheet 40% over two years. Some experts said the Bank should have paid more attention to money supply as inflation pressure emerged and Macklem tonight said with perfect hindsight he would have raised rates sooner. (See: BOC Needs Faster Hikes, Risks Slump-Ex Adviser) While 5-year bond yields climbed to 3.44% from 2.92% in the last six months, most of that is from rapid inflation not bond supply.