Canada Central Bank Policy Research Brief
CBC Action Signals Recovery Progress;
Investors May Notice Rippling Impact
Asset purchase taper may put upward pressure on interest rates. Starting in July the Central Bank of Canada (CBC) will reduce weekly asset purchases from $3 billion to $2 billion. Additional moderations could take place in the coming quarters and the program may be phased out completely by year end. Scaling back quantitative easing indicates confidence in the economic recovery from the pandemic. At the same time, lower weekly asset purchases could apply upward pressure to interest rates with less liquidity being injected into the money supply. Nonetheless, the CBC stood firm on its plan to hold the key policy rate at 0.25 percent during the July meeting, though unexpectedly severe inflation could force the hand of the central bank.