Bank of Canada calms markets, boosts liquidity
The Bank of Canada intervened a bit more than usual today in an attempt to help investors suffering from the high turbulence in both Canadian and American stock markets. Canada’s central bank took the rare step of publicly reassuring investors that it will help provide stability to financial markets and the domestic financial system - the last time the Bank provided this type of assurance was following the Sept. 11 terrorist attacks in New York and Washington.
“In light of current market conditions, the Bank of Canada would like to assure financial market participants and the public that it will provide liquidity to support the stability of the Canadian financial system and the continued functioning of financial markets,†the central bank said in a brief statement.
BoC (Bank of Canada) also intervened to the tune of $1.455 billion by buying government securities from market participants, and would sell them back the next day. It also had made $1.64-billion available to Canadian banks at its regular target interest rate, considerably more than recent daily infusions.
Central banks around the world are in the same process of injecting money into the system (as did the European Central Bank today as well) as the credit woes spread internationally. BoC’s injection although large, is not all that unusual. This should not be taken as a hint of weakness in the Canadian economy. The action is just meant to calm the itching nerves of investors in the marketplace today - which ultimately is the job of the central bank. The BoC by injecting cash into the system, has only provided an assurance that there is plenty of liquidity available - not a reason to worry.
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