OTTAWA (Reuters) – Bank of Canada (BoC) Deputy Governor Toni Gravelle will discuss normalization of the central bank’s balance sheet in a speech on March 21, the CFA Society of Toronto said in a post on its website.
There’s been speculation among some analysts that the central bank would soon put the brakes on its quantitative tightening (QT) program, a counter measure adopted to suck out massive liquidity pumped into the financial system during the pandemic era.
In its monetary policy statement on Jan. 24 the bank said that it would continue with its QT program. Still, the scheduling of a speech next month on balance sheet normalization could be a signal that the end of QT was coming soon, Simon Deeley, director for Canada rates strategy at RBC Dominion Securities Inc, said in a note on Tuesday.
Deeley expects the speech would lay the groundwork for an end of QT and a move to replace maturing bonds on the BoC’s balance sheet, likely at the April 10 policy announcement when the central bank is also due to update its economic forecasts. The BoC’s next monetary policy decision is due on March 6.
After the BoC held rates steady for the fourth time last month, its Governor Tiff Macklem told reporters that it was too soon to end QT but the central bank would be refining its view on the appropriate size of the balance sheet as it approaches a previous estimate.
The Canadian central bank launched QT in April 2022, aiming to reduce the size of its balance sheet after it purchased bonds in large scale to support the economy during the COVID-19 pandemic.
It had earlier indicated that QT will run until the end of 2024 or the first half of 2025 when settlement balances will have fallen to a steady level, which it estimates to be in a range of C$20 billion to C$60 billion ($15 billion to $44 billion)), or roughly 1% to 2% of GDP.
($1 = 1.3552 Canadian dollars)
(Reporting by Promit Mukherjee and Fergal Smith; editing by David Ljunggren and Emelia Sithole-Matarise)
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