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Bank of Canada says it will not actively sell bonds when QT starts -Breaking


© Reuters. FILE PHOTO. Tiff Macklem, Bank of Canada Governor, speaks at a news conference held in Ottawa (Ontario, Canada) December 15, 2021. REUTERS/Blair Gable

OTTAWA, 3 March (Reuters) – The Bank of Canada will not actively sell bonds as it embarks on the first quantitative tightening program. Instead, they will let holdings roll off as their maturity, Governor Tiff Maklem announced on Thursday.

Macklem addressed a webcast audience of business people, but did not specify a date for QT. She stated only that it would “be a natural next steps” after the Wednesday decision to increase interest rates.

We will cease purchasing Government of Canada bonds when we start QT. “Maturing Government bonds that are still in their prime will be no more when the balance sheets roll over,” he stated. We do not plan to sell bonds.

To maintain its constant balance sheet size, the Bank of Canada purchases approximately C$1Billion worth of bonds from government agencies each week during the current phase of reinvestment.

Macklem said that the current increase in prices was cause for concern. He promised the bank it would continue to use its monetary policies “with determination” so long-term inflation expectations are well anchored.

His statement was “The lesson learned from history”: If inflation expectations are not anchored, it is much more expensive to get inflation back on track. Canada’s January inflation reading was 5.1%, a record for the country.

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