
BoC releases review of exceptional policy actions taken during the pandemic; says in future, it could be clearer about limited circumstances under which it would conduct large-scale asset purchases in a time of crisis
- This would guard against moral hazard when market participants take bigger risks thinking the bank will intervene if things go wrong.
- It could improve programs by more clearly distinguishing between asset purchases to restore market functioning and asset purchases for monetary stimulus.
- It should outline purpose of each program and design them to ensure they are temporary and have a clearly defined exit strategy.
- Measuring precise impact of quantitative easing is challenging.
- Found QE kept longer-term rates lower than they otherwise would have been, thereby boosting the economy.
- If QE is needed again, bank could link size and pace of purchases, as well as end of QE, more clearly to the inflation outlook.
- Its own analysis indicates its policy actions, including QE, did not on their own push inflation significantly above 2%.
- In future, extraordinary forward guidance could be more clearly tied to the inflation outlook and emphasized more in communications
- Governing council agreed that the bar for using exceptional monetary policy tools should remain very high.
- It is also improving its forecasting tools and has started work on new generation of economic models.
- New models will distinguish between inflation that comes from higher demand and inflation that comes from higher input costs
17 Jan 2025 - 16:00- Forex- Source: Newswires
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