Bank of Canada Resumes Treasury Bill Purchases: What Does This Mean for Inflation?
The Bank of Canada (BoC) restarted its “routine” purchases of short-term Treasury bills (T-bills) on December 16, reigniting debate among economists about the impact of this move on prices in 2026 and the consequences of past asset purchase programs.
The central bank announced the decision on November 13, explaining it was necessary to “restore a more balanced mix of assets on the Bank’s balance sheet.” Treasury bills are debt securities with a maturity of up to one year, which Ottawa issues for temporary funding. The Bank forecasts that it will not need to resume the purchase of long-term government bonds until 2027.
Expert opinions are divided: Some argue that renewed T-bill purchases will increase the money supply and add inflationary pressure. Economist Jack Mintz from Calgary views this as a return to Quantitative Easing (QE), which, in his opinion, provides the government with a “cheap source of finance” for deficits and pushes prices upward. He rejects the idea that the increase in the money supply was unrelated to the inflationary surges of previous years.
Others, including former Bank of Canada deputy governor Paul Beaudry, call this move a routine balance-sheet operation that synchronizes the volume of cash in circulation with economic growth and will have little impact on prices. Beaudry believes that fears about inflation rising due to “money printing” are an “old view,” and critics should focus on how adequate the level of interest rates was. Carleton University professor Ian Lee agrees that this is a routine process, not “literal money printing.”
Causes of the 2021 Inflation Surge
There are significant disagreements regarding the causes of the inflationary surge observed during the COVID-19 period:
Paul Beaudry and Ian Lee agree that global supply chain problems were the main factor.
Ian Lee adds that Ottawa’s fiscal policy (direct payments to citizens) exacerbated the situation, provoking a rise in demand amid the supply shock. A report from the C.D. Howe Institute also places a “critical role” on fiscal policy ($360 billion in emergency transfers).
Jack Mintz believes the Bank of Canada “didn’t take inflation seriously,” and its monetary policy combined with government spending led to increased demand and prices.
💡 Forecasts
The Bank of Canada forecasts that inflation will remain at around 2% in 2026, although U.S. tariffs and the global restructuring of trade may exert upward pressure. Bank Governor Tiff Macklem stated in October that the current key interest rate (2.25%) is “at about the right level” to keep inflation close to the 2% target.
However, given that recent polls indicate 61% of Canadians believe the cost of living is worsening because of excessive government spending, the debates about Ottawa’s monetary and fiscal policies remain current.