Central Bank Announcements Sent Global Markets Lower

The Bank of Canada announced on Wednesday that it will be ending its quantitative easing policies and stopping the purchases of new bonds, though it will not increase interest rates just yet. The bank has been keeping interest rates low by buying billions of dollars in federal bonds, but the recent increase in job growth and high vaccination rate have enabled the country's economy to recover enough to end the justification for such stimulus.

Bank of Canada governor Tiff Macklem has been under pressure to fight inflation by raising interest rates, but the move hasn't yet been implemented due to the risk of limiting the country's economic recovery. “We know higher prices are challenging for Canadians, making it harder for them to cover their bills. I want to assure you that inflation is not going to stay as high as it is today, even if it is going to take somewhat longer to come down,” Macklem said in a statement. Canada's interest rate is currently sitting at 0.25 percent, but this may change as early as Q3 2022.

According to the Financial Times, most financial analysts had expected the BoC to halve its bond buying program rather than to halt it entirely. The BoC also slashed its forecast for the country's economic growth to 5.1 percent, down from the 6 percent growth it had forecast in July. The announcement sent the Canadian dollar higher, ending the currency's four-day losings streak, but sent stocks lower during Wednesday's NY trading session.

Bank of Japan Keeps Policies Stable

On Thursday morning, the Bank of Japan kept its easy monetary policy stable and announced a projected inflation rate below its 2 percent target for at least two more years. The announcement was in-line with expectations and confirmed that the BoJ is likely to remain behind its peers when it comes to ending its stimulus policies. Economists polled by Reuters expect that 13 out of the 25 central banks will raise their interest rates at least once before the end of 2022.

Japan's economy recovered fairly quickly from the pandemic thanks to overseas demand, but the recovery was capped by chip shortages which have plagued manufacturers worldwide. Likewise, increasing commodity costs have sent the country's wholesale inflation levels to a 13-year peak. Still, the BoJ remains optimistic about the country's recovery, and it classified the resent decline in exports as temporary.