BoC Governor Macklem: “A natural next step” after rate hike is to move to QT

Bank of Canada Governor Tiff Macklem said on Thursday that the decision to hike interest rates means ending reinvestments and moving towards Quantitative Tightening (QT) as "a natural next step", Reuters reported. The timing and pace of QT will be fully transparent, Macklem added, saying that when we initiate quantitative tightening, we do not intend to actively sell bonds.

Additional Remarks:

"When we initiate quantitative tightening, we do not intend to actively sell bonds."

"Broadening in price pressures is a big concern and makes it more difficult for Canadians to avoid inflation."

"Longer-term inflation expectations have remained well anchored and we will use our tools 'with determination' to keep them that way."

"History shows that if inflation expectations become unmoored, it becomes much more costly to get inflation back to target."

"We need higher rates to dampen spending growth so demand does not run significantly ahead of supply."

"Canadian economy can handle higher rates; we know this will be a significant adjustment."

"We expect global demand and supply of goods to gradually come into better balance through 2022."

"Roughly 40% of our bond holdings mature within the next 2 years; this suggests balance sheet would shrink relatively quickly."

"As Canadian gov't bond holdings mature and roll off, the level of settlements balances on our balance sheet will decline roughly in tandem."

"Our primary tool is the policy interest rate; adjustments to pace and timing of removal of monetary stimulus will focus on policy rate."

"We fully intend to tighten policy in a deliberate and careful away, being mindful of the impacts and monitoring effects closely."