Cumulative losses at the Bank of Canada could reach between $3.6 billion and $8.8 billion over the next two to three years, according to a new report from the C.D. Howe Institute.
In “Reversal of Fortunes: Rising Interest Rates and Losses at the Bank of Canada,” authors Trevor Tombe and Yu (Sonja) Chen examine the state of central bank’s finances, how it got into a loss position and how big those losses could be.
The Bank is currently responding to high inflation by increasing its policy interest rate. Having expanded its balance sheet by buying government bonds and increasing its liabilities to the financial institutions it bought them from, the Bank now faces growing interest expenses and multi-billion-dollar losses.
