Bank of Canada ends Quantitative Easing

Note: This section contains information in English only.
Source: Dukascopy Bank SA
On October 27, the Bank of Canada announced its policy rate and published its Rate Statement together with the Monetary Policy Report. In general, the bank kept its interest rate unchanged. However, the bank revealed that it expects that it would hike interest rates in the middle of 2022. Moreover, the bank stated that it would end its quantitative easing program.

Quoting the statement: " The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank's extraordinary forward guidance on the path for the overnight rate is being maintained. The Bank is ending quantitative easing (QE) and moving into the reinvestment phase, during which it will purchase Government of Canada bonds solely to replace maturing bonds.

The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank's projection, this happens sometime in the middle quarters of 2022."

Statement on Monetary Policy

Bank of Canada maintains policy rate and forward guidance, ends quantitative easing

On the announcement, the USD/CAD currency exchange rate lost 70 base points, as the value of the Canadian Dollar immediately surged. Moreover, the rate continued to decline after the central bank's announcement,

On a larger scale, the rate has been declining since September 20. The USD/CAD has declined by 4.19% during the five week period.

Initial Reaction

Larger scale situation

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