Bank of Canada poised to lose money for the first time on rising interest expenses

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The central bank’s aggressive push to increase interest rates has created a mismatch on its balance sheet. It is now paying a higher interest rate on its liabilities

Experts don’t expect these losses to impact the conduct of monetary policy. Central banks aren’t motivated by profit and they can’t run out of money like a normal corporation.

The main beneficiaries of rising interest payments on Bank of Canada liabilities are Bay Street banks, who are now earning much higher rates on their risk-free deposits at the central bank. Other central banks have already begun reporting losses – both net interest losses and direct losses from selling bonds whose value has dropped as interest rates have risen.

So what changed? Two things: first the size of the bank’s balance sheet, then its benchmark interest rate. However, the calculus changed dramatically as the bank increased its overnight rate to fight inflation. It is now paying an overnight rate of 3.75 per cent on roughly $200-billion worth of settlement balances. Meanwhile, the weighted-average yield of government bonds the bank bought during the pandemic is only 0.65 per cent, according to Mr. Badertscher. That’s a money-losing formula.

 

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Do you think they will give themselves another raise?🤠

As Canadians are saying to the Bank of Canada 'You can't get blood out of a rock'. You bled us dry.

In other words they will profit 49 billion instead of the 49 1/2 billion 3 months ago

But they didn’t print money, say the sycophants

For those financial institutions that keep the money on deposit, the Bank of Canada must pay interest — at the going rate. Because rates are now rising, the bank is now losing money and will need a bailout for the first time in history Pierre Poilievre, National Post, November 1

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Bank of Canada governor Macklem has 'declared class war on working people': Unifor president | CBC NewsThe head of UNIFOR said Monday that Bank of Canada Governor Tiff Macklem is waging a 'class war' on working people and it's time to stop hiking interest rates. The head of UNIFOR prefers run-away inflation. Govt debt & BoC money printing did this. I don’t often agree with unions but she is 100% right. The only people who will benefit are the wealthy and the extreme wealthy. The middle class are getting a 💩kicking and not one seems to care.
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