Evidence of meeting #7 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
NDP
Governor, Bank of Canada
It changes, but on July 15, which would probably have been close to the peak, term repos were $195,905,000,000.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
That would be the complete support in liquidity offered by the Bank of Canada.
Governor, Bank of Canada
That would be the biggest program. We stood up about 11 programs in the space of two weeks. Term repos would be the main tool to support their funding, but we were buying all sorts of assets: Canada mortgage bonds, Canadian government bonds—
Governor, Bank of Canada
I can't just give you one number. There are 11 programs. They're changing every week.
Liberal
The Chair Liberal Wayne Easter
I wonder, to simplify this, could we get a bit of a written response to explain that? That might be the best way to go.
Your third question—
Governor, Bank of Canada
That's a good suggestion, Chair. I'm happy to do that.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Thank you so much.
Billionaires have increased their wealth by $53 billion. Deputy Governor Wilkins indicated that international tax policies needed to be changed so that digital companies contribute their fair share.
Are you worried—and I'm asking both of you—about this perception that some very big players have made a ton of money during this pandemic and regular folks are being left behind?
Governor, Bank of Canada
We are concerned that this pandemic is widening divides in society. If you look at employment in particular, there's no question that this pandemic has particularly affected low-income Canadians. In our monetary policy report, one chart, which I find really quite stunning, shows that if you look at job losses since the beginning of the pandemic, low-wage Canadians have certainly regained some jobs, but these remain roughly 20% below pre-pandemic levels. Other Canadians are back to their pre-pandemic levels of employment, on average. What this really highlights is that this pandemic has particularly affected low-wage workers. Many of them are youth, women and recent immigrants, and we are concerned that the longer people are unemployed, their skills deteriorate and it's harder to get back into the labour force and, therefore, they may become discouraged and give up looking for a job. That's why it's really important that we do everything we can to help the economy recover and get Canadians back to work. That really is why we are providing this extraordinary amount of monetary policy stimulus, to get people back to work and get inflation back to target. That's the best contribution we can make to try to reverse the widening divides that this pandemic has created.
Liberal
The Chair Liberal Wayne Easter
Okay. Thank you.
We will have to move on.
I'll give you the round out to conclude at 5 p.m. We have Mr. Kelly, Mr. Fragiskatos, Mr. Poilievre, I believe, and Ms. Dzerowicz, and we'll try to fit Mr. McLeod in at the end so that everybody has an opportunity.
Mr. Kelly.
November 26th, 2020 / 4:40 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
How much does the Bank of Canada stand to lose if interest rates rise prior to the maturity dates of the securities you hold?
Governor, Bank of Canada
The Bank of Canada's purchase programs are indemnified by the Government of Canada, so we wouldn't lose.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
If rates rise, what is the risk to the Canadian economy and to Canadians?
Governor, Bank of Canada
There is the potential that if we were to sell the bonds before they reach maturity, there could be capital gains or losses on them. That's just normal. If we hold them to maturity, of course, those don't get realized. It's a difficult question to answer. We've indicated that our quantitative easing program will continue until the recovery's well under way—
Governor, Bank of Canada
I expect that we would then hold those bonds for some time.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
You have said several times today that.... You were asked by Ms. Jansen if you were going to discontinue quantitative easing when inflation hits 2%. You said that you expect recovery to be well under way before that. When we know we have recovery well under way, when can you commit to ending quantitative easing?
Governor, Bank of Canada
I'd love to be able to put this on a calendar for everybody, but there's a very high degree of uncertainty about the evolution of the economy, which really is closely linked to the uncertainty about the evolution of the virus. Unfortunately, we're living that as we speak, as we see cases rise and new restrictions having to be imposed on the economy. We've been very clear about the conditions under which we would do this. We're not in a position to put that on a calendar with any high degree of confidence, and I wouldn't want to give you a false sense of precision.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Okay. It seemed less clear when it was no longer about the 2% inflation threshold.
I have only a few moments, so I will cede my time to Mr. Poilievre. I think he has a question he wants to get in.
Liberal
The Chair Liberal Wayne Easter
He will have another round as well, Mr. Kelly.
Go ahead, Mr. Poilievre. You have about three minutes.
Conservative
Pierre Poilievre Conservative Carleton, ON
Yes.
Mr. Governor, let me tell you that it gives me no comfort whatsoever that you are indemnified by the Government of Canada. That means that the taxpayer has to pick up any losses you have.
Mr. Kelly's question was a good one. You're buying these bonds at inflated prices, because of course you've inflated them by pumping $400 billion into markets. As interest rates return to normal, those bond prices go down, because of course bond prices are inversely correlated with rates of interest. In other words, you would be in a financial loss position on those bonds. We're talking about almost half a trillion dollars' worth of bonds and treasuries here.
How much would the Bank lose if interest rates over the medium term returned to normal levels?