What is Quantitative Easing?
Quantitative Easing (QE) is when a central bank buys large scale financial assets to essentially inject money into the economy
This increases the money supply and encourages lending and economic activity
The Bank of Canada relies on QE to Sustain Canadian Economy
The Bank began aggressive QE at the start of the pandemic and will most likely continue until the Canadian economy has recovered and inflation is back at 2%
Recovery of the economy will heavily depend on the path of the COVID-19 pandemic
This could take a few years as health experts are expecting a second wave as schools reopen and the months turn colder
As the economy moves from reopening to recuperation, it will require continued monetary policy support. As such, the Governing Council will keep policy interest rates at its lower limit until the target 2% inflation rate is sustainably achieved.
Bottom Line: A rate hike is highly unlikely this year, or in 2021. This is good news for anyone with a variable rate as they can rest assure their rates will stay low for the next few years.
*The information and graph above are taken from Sherry Cooper [Chief Economist of DLC]
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