Economists at Desjardins gave the Bank of Canada a passing grade over top marks for its pandemic response in a report card. Here\u0027s why.
They said the Bank of Canada started off strong as COVID-19 hit, jumping into action as markets plunged and the economy ground to a halt amid initial lockdowns. But even though they “performed admirably,” policymakers missed the mark.
The bank failed to rein in its bond purchasing quickly enough, and was left holding a huge percentage of outstanding debt in the market — owning up to 60 per cent of some bond issues. That spawned “market functioning issues,” Desjardins said, without doing anything good for monetary stimulus.Policymakers also shot themselves in the foot by pledging to hold interest rates for as long as there was slack in the economy.
“While it’s true that a firefighter can’t be criticized for using too much water when the fire is blazing, keeping the taps open and soaking reconstruction crews doesn’t do anyone any good,” the economists wrote, slapping the central bank with a C-.Article content
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