The Bank of Canada (BoC) announced on Wednesday that it left its key rate unchanged at 0.25% following the October policy meeting as expected. More importantly, the BoC decided to end its weekly purchases of the government of Canada bonds, the quantitative easing program. The policy statement revealed that the BoC will continue to buy only enough bonds to replace those that are maturing.

Market reaction

With the initial market reaction, the USD/CAD pair fell sharply and was last seen losing 0.42% on the day at 1.2336.

Key takeaways from policy statement as summarized by Reuters

"Economic slack should be absorbed sometime in the middle quarters of 2022; had previously said this would happen in H2 2022."

"Maintaining extraordinary forward guidance on the path for the overnight rate."

"Moving from QE into the reinvestment phase, will now purchase Canada government bonds solely to replace maturing bonds."

"Will keep overall holdings of Canada government bonds roughly constant."

"Economy continues to require considerable monetary policy support."