A Bank of Canada official said quantitative tightening will likely end in 2025, at which point the central bank will consider purchasing assets in both primary and secondary debt markets.
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The remarks suggest the central bank’s plans to shrink its balance sheet haven’t changed substantially in the last year, and will help to end to speculation officials will be soon forced to wind down QT. In the speech, Gravelle explained that the resumption of purchases was meant to stabilize the bank’s balance sheet, and reiterated that’s different than the pandemic era asset purchases intended to stimulate the economy.
“We want to restore a more balanced mix of assets with a broader range of maturities, including more short-term assets than we hold now. Government of Canada bonds will still be our biggest asset type,” the deputy governor said. Earlier this year, liquidity pressures in funding markets led some economists and strategists to question whether Canada’s financial system was already running short on settlement balances, a situation that might have hastened the end of QT.
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