OTTAWA — Bank of Canada deputy governor Toni Gravelle says the central bank expects quantitative tightening to end sometime in 2025.
Gravelle is delivering a speech today in Toronto on how the central bank plans to manage its balance sheet after that.
The Bank of Canada launched quantitative easing operations for the first time ever during the pandemic – a process that involved buying government bonds from financial institutions using central bank money called settlement balances – to indirectly drive down interest rates. The central bank is now allowing those bonds to mature without being replaced, a move that has decreased the value of settlement balances financial institutions hold to about $100 billion.
The deputy governor says the central bank estimates that process, which is called quantitative tightening, will end when settlement balances decline to somewhere between $20 billion and $60 billion. Gravelle says once quantitative tightening ends, the central bank will resume its normal market operations, meaning it will purchase financial assets to reflect growth in cash circulating in the economy.
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