The Bank of Canada's move to end its pandemic-driven purchases of government bonds to stimulate the economy, and warnings of rate hikes sooner than previously expected, has coloured federal efforts to craft an annual plan to manage the debt.
By the bank's own estimates, its program dropped rates of return on short-term government debt by 10 basis points, or one-tenth of a percentage point.
As rates go up, so too will the amount the government has to pay, which one expert suggests might make the Liberals more cautious about deficit spending and the debt itself. "I think it will change the language that the government uses and there will be a pivot this year," Young said of the debt and rising rates.
"Your members … are people who think about the debt, who think about the deficit," she said. "I want to tell you guys, I do too. Please bear that in mind when you think about our announcement last week." Sherry Cooper, chief economist at Dominion Lending Centres, notes that since September, returns on the federal government's five-year bond jumped by 75 per cent.
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