The central bank anticipates losses for the next three years, depending on how its inflation fight goes. Find out what that means.
“We expect the bank’s net interest income to be negative when our third-quarter results are published on Nov. 29,” the central bank said in a
Typically, the Bank of Canada’s balance sheet makes money because the liabilities consist almost entirely of bank notes, which don’t pay interest, while on the other side, the central bank earns interest on its assets. The Bank of Canada Act says the central bank must send its profit to the federal treasury at the end of each fiscal year. Recently, that’s been about $1 billion a year.
An unintended consequence of that policy is that for the first time in its 87-year history, the Bank of Canada is on track to lose money for an extended period, as interest expenses on deposits climb in tandem with the benchmark interest rate, which Macklem has raised by three percentage points since March in an attempt to cool demand that has helped push annual inflation to about eight per cent, the highest level since the early 1980s.
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