The Bank of Canada appears to be on to the scent of its own bullsh*t.
The central bank of Canada admitted on Thursday of last week that "some of the monetary policy tools it is using to address the COVID-19 pandemic, such as quantitative easing (QE), could widen wealth inequality," according to a new report from the Financial Post.
As a result, it said it was "looking closely" at the issue. We won't hold our breath for any type of major breakthrough in thinking...
That being said, the bank admitting that its QE program was "boosting wealth by inflating the value of assets" is a step in the right direction.
Governor Tiff Macklem said last week: “...these assets aren’t distributed evenly across society. As a result, QE can widen wealth inequality. We will look closely at the outcomes of QE here and elsewhere and will work to more fully understand its impact on both income and wealth inequality.”
The Bank of Canada had been buying CA$4 billion in government bonds per week and recently cut that to CA$3 billion. It is the first major central bank to taper, signaling that it could also raise interest rates next year.
And for us, looking for any semblance of common sense, beggars can't be choosers. Macklem, in the same breath, reiterated that the bank's benchmark rate would stay at 0.25% until inflation sustainably hit 2%.
“Today, we are in the sharpest and most unequal economic cycle in our lifetime,” he concluded.
And while he may be right - we can't help but wonder: does he know why that is?