The Bank of Canada lost $522 million in this year’s third quarter, marking the first negative investment return in the central bank’s 87-year history.
In its latest quarterly financial report, the Bank of Canada said its revenue from interest on assets did not keep pace with the interest charges on deposits, which have risen this year alongside interest rates.
The Bank of Canada's aggressive interest rate hikes have raised the cost of interest charges the central bank pays on settlement balances deposited in the accounts of big banks. At the same time, the income the central bank receives from government bonds remains fixed.
The Bank of Canada expanded its assets during the pandemic as part of its government bond purchasing program. Known as “quantitative easing,” the policy was part of the central bank's efforts to stimulate the economy during the COVID-19 crisis.
The expansion in assets is now costing the central bank because it paid for the government bonds with the creation of settlement balances.
The Bank of Canada has said it is making balancing its books a priority.
