(Bloomberg) -- A Bank of Canada official defended the use of quantitative easing and extraordinary forward guidance during the pandemic, pushing back on criticisms that the policy actions were missteps that fueled inflation.

In a speech reviewing the central bank’s actions, Deputy Governor Sharon Kozicki said its first foray into quantitative easing — which led the bank to purchase C$340 billion ($248 billion) in bonds — helped to encourage borrowing by lowering bond yields.

She also defended the central bank’s use of extraordinary forward guidance — Governor Tiff Macklem’s 2020 message that interest rates would remain low for longer than markets expected — saying it also helped to lower longer-term rates.

Both measures encouraged spending and reduced the risk that inflation would fall short of the 2% target, Kozicki said in Ottawa on Thursday. 

And while policymakers say quantitative easing added as much as 3% to gross domestic product, the bank sees little relationship between the use of its policy levers and the subsequent jump in inflation that peaked at 8.1% in June 2022.

“The evidence suggests that the run-up in inflation that started in 2021 was mainly driven by supply-side issues, including commodity price swings and supply disruptions.”

Still, Kozicki noted that policymakers are currently reviewing the measures and consulting with experts in order to assess the broader impact. The bank says the review is expected to be released early next year.

“I’m not going to pretend that we got everything right in our pandemic response,” she added.

Conservative Leader Pierre Poilievre — whose party is leading Prime Minister Justin Trudeau’s Liberals in the polls — has routinely criticized the Bank of Canada’s policy measures during and after the pandemic. He’s also said he’d fire Macklem if elected, a threat he’s since backed away from.

The bank’s use of exceptional forward guidance also shook public confidence in the institution. In July 2020, Macklem said: “If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time.”

Just 20 months later, in March 2022, the Bank of Canada started an aggressive hiking cycle as price pressures spiked — officials tightened monetary policy by 475 basis points in a little over a year. That dented credibility and drew the ire of households that were forced to manage debt at much higher interest rates. 

Last week, the Bank of Canada cut the key benchmark rate to 4.75%, leading the Group of Seven central banks into monetary easing. Traders in overnight swaps put the odds around two-thirds of another rate cut at the bank’s July meeting.

Kozicki reiterated the bank’s messaging, saying the bank is “seeing more signs that underlying price pressures are easing.”

The Bank of Canada repeated that it continues to see quantitative tightening ending in 2025. 

Kozicki said yields on five-year government of Canada notes were more closely linked to the policy rate during the pandemic period compared to other instances when the bank was forced to cut rates. 

She said the bar to use quantitative easing again is “very high”.

--With assistance from Jay Zhao-Murray.

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