Bank of Canada sees more QE, forward guidance going forward

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OTTAWA, Dec 15 (Reuters) - A low global interest rate environment means the Bank of Canada will likely need to use tools like forward guidance and quantitative easing more often to deal with economic shocks, Governor Tiff Macklem said on Wednesday.

Macklem, in a virtual speech to a business audience, said with the neutral rate of interest lower globally than in the past, central banks have less room to lower rates to deal with crises. That means they will need to use other stimulus more often.

"With low global interest rates, the Bank is likely to lower its policy rate to the (effective lower bound) more often in response to shocks. That means we may need to use forward guidance and our balance sheet more often than has been required in the past," he said.

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"These alternative tools work, but we don't have as much experience using them," he added.

The Bank of Canada slashed its benchmark rate to its effective lower bound of 0.25% in March 2020, as the coronavirus pandemic took hold. It also launched its first-ever quantitative easing program and said rates would stay low for a prolongued period.

(Reporting by Julie Gordon and David Ljunggren)

((Reuters Ottawa bureau, +1 647 480 7921; david.ljunggren@tr.com))

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