By Paul Vieira

OTTAWA--A senior Bank of Canada official on Thursday provided one of the central bank's most fulsome defenses yet for purchasing a sizable chunk of bonds during the pandemic, saying the efforts lifted economic output by as much as 3%.

Deputy Governor Sharon Kozicki said bank research indicates longer-term yields, which help lenders set the rates for loans and other forms of credit, would have been nearly a percentage point higher had the Bank of Canada not launched so-called quantitative easing in the spring of 2020. At the time, public-health authorities and governments imposed broad-based social restrictions to slow the spread of Covid-19, leading to employers shedding millions of jobs and output shrinking by the most since the Great Depression. Besides quantitative easing, in which the central bank purchases bonds to bring down longer-term borrowing costs, the central bank cut its main interest rate by 1.5 percentage points to 0.25% and provided explicit guidance on the rate path.

The research "suggest our policies were effective in increasing borrowing," said Kozicki, according to prepared remarks she is scheduled to deliver at an economics conference in Ottawa. The policies "helped lower longer-term interest rates by increasing monetary policy stimulus even after the policy rate was brought down as low as possible."

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(END) Dow Jones Newswires

06-13-24 0950ET