OTTAWA (Reuters) - The Bank of Canada has not forgotten about financial vulnerabilities as it responds to the coronavirus pandemic and low oil prices, Governor Stephen Poloz said on Thursday, noting the central bank’s balance sheet had tripled.
Poloz, speaking to business students via videoconference, said cumulative asset purchase programs that the bank launched to help tackle the outbreak stood at C$260 billion ($187 billion) as of last Friday, equivalent to more than 10% of Canada’s gross domestic product.
The central bank has also slashed interest rates to just 0.25% and launched its first-ever quantitative easing program.
“At present, we face asymmetric risks, as the downside risks are far more dire than the upside ones. This simplifies our risk-management problem for the time being,” Poloz said, noting that low rates tended to promote increased borrowing and spending.
“We have not forgotten about financial vulnerabilities — we will put more weight on them in our risk-management framework once we are confident that our primary objective will be met,” he added.
The Bank of Canada previously identified high levels of household debt and an imbalanced housing market as important vulnerabilities for the Canadian economy.
Poloz has said repeatedly that one of the bank’s key areas of focus has been to create liquidity to ensure financial markets keep functioning well.
($1 = 1.3933 Canadian dollars)
Reporting by Kelsey Johnson; Editing by Franklin Paul and Peter Cooney
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