Bank of Canada says QE can widen wealth inquality, is probing its effects

OTTAWA, May 13 (Reuters) - The Bank of Canada said on Thursday 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 and that it was looking closely at the issue.

Governor Tiff Macklem, speaking to university students in Atlantic Canada by videoconference, said that while the QE program stimulated demand and helped create jobs, it was also boosting wealth by inflating the value of assets.

“But of course, these assets aren’t distributed evenly across society. As a result, QE can widen wealth inequality,” he said. “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.”

As part of its QE program the bank had been buying C$4 billion ($3.3 billion) of government bonds a week but last month cut that to C$3 billion.

Macklem also reiterated that the benchmark interest rate would stay at its current record low 0.25% until inflation was sustainably at the 2% target. The bank, he added, would continue to use monetary policy tools to “support a complete recovery.”

($1=$1.21 Canadian)

Reporting by Julie Gordon and David Ljunggren