Bank of Canada Lays Out Plans to Slow QE, Halts Other Programs

The Bank of Canada provided the greatest guidance yet into how it plans to slow purchases of government bonds as the economic recovery accelerates, fueling expectations it could begin doing so as soon as April, Bloomberg News reported. In a speech on Tuesday, Deputy Governor Toni Gravelle said that the central bank is winding down emergency liquidity programs it deployed to grease markets when the coronavirus hit last year, including programs to buy provincial and corporate debt. He also provided insight into how the central bank plans to pare back its main government bond purchasing program -- including a pledge that any tapering will be gradual. Policy makers have been buying a minimum of C$4 billion ($3.2 billion) in federal government bonds each week to help keep borrowing costs low. Economists say that pace may no longer be warranted, with an outlook that appears to show the economy growing at a much stronger clip than officials had been expecting. The central bank also wants to avoid taking ownership of too large a share of the outstanding bond market. Currently, the bank owns a little more than 35% of the total market of outstanding government of Canada bonds. Governor Tiff Macklem has said that when holdings rise above 50%, market functioning could get distorted. Read more.