The bank said quantitative easing was initially deployed to restore market functioning during the economic shock of the pandemic. It complemented then-Governor Stephen Poloz’s decision to cut interest rates from 1.75 per cent to 0.25 per cent, injected liquidity throughout financial markets and helped to keep longer term borrowing costs lower.
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Still, monetary policymakers under Macklem continued large asset purchases well into the recovery. In total, the bank bought $340 billion in bonds, and at peak in 2021 the central bank held as much as 43 per cent of Canadian government bonds on its balance sheet.
While the Bank of Canada wasn’t buying most of its bonds directly from the primary government auctions, its purchases in secondary markets may have given other market players the confidence to buy from the government at higher prices than they would have otherwise paid, Kronick said.
