The Bank of Canada could lose as much as $8.8 billion over the next few years, according to a new report that warns the central bank could face a communications challenge as a result of the losses.
The report from the C.D. Howe Institute estimates that total losses over the next two to three years will amount to between $3.6 billion and $8.8 billion.
"A lot of what determines the size of the losses really comes down to what the interest rates will be over the next two to three years," said Trevor Tombe, a professor of economics at the University of Calgary and co-author of the report. .
In the fall, the Bank of Canada posted its first loss in its 87-year history, losing $522 million in its third quarter.
The central bank said in its financial report that interest income on its assets did not keep pace with interest charges on deposits at the bank, which have grown amid rising interest rates.
That problem is expected to persist as long as interest rates remain high.
The other factor influencing the size of losses is the size of financial institutions' deposits at the central bank, Tombe said.
While losses do not affect the Bank of Canada's ability to conduct monetary policy, Tombe said they represent a communication challenge for the central bank.
Historically, the Bank of Canada has always made a profit, which it remits to the federal government. According to the report, those profits over the bank's entire history total about $160 billion in 2021 dollars.