If these forces had been left unchecked, Canadian businesses and households could have faced a severe credit crunch. Swift and aggressive policy was therefore needed to restore market functioning. Starting in mid-March, the Bank expanded its funding to financial institutions and launched various asset purchase programs, all to address problems with market functioning. Our asset purchases serve a dual purpose.
First, the purchases themselves help support the functioning of the markets in which we are buying. Second, we carry out these purchases by expanding financial institutions’ deposits at the Bank of Canada, which helps satisfy the demand for additional liquidity under turbulent conditions.