For the first time in its 87-year history, the Bank of Canada has recorded a financial loss.
This week, the bank reported a $522 million loss in the third quarter of the current fiscal year, which the central bank blames on revenues from interest on its assets being outpaced by the interest charges on deposits at the bank. Interest rates on deposits have considerably increased since January, when the central bank began increasing the key rate to wrestle with growing inflation.
To date in 2022, Canada’s central bank has raised rates six times, increasing its benchmark interest from 0.5 per cent to the current 3.75 per cent. This rate is known as the amount retail banks are charged for short-term loans.
BNN Bloomberg reported Bank of Canada Governor Tiff Macklem addressed the expected losses last week before the House of Commons finance committee.
“Following a period of losses, the Bank of Canada will return to positive net earnings,” Macklem said.
According to BNN, the governor told the committee the losses would not negatively impact its monetary policy; however, he said the losses could continue if interest rate hikes continue and if the economy deepens into a recession.