BoC Indicates Ending QT Late 2024 or 1H25, Market Looks Through It

• BoC Dep Gov Gravelle says QT will likely end in late 2024 or 1H25 although the timing may shift as the BoC balance sheet evolves, there is a very high bar for use of QT and the estimated floor for reserves is between C$20B-C$60B.
• The fallout from global bank turmoil will factor in the next BOC MPR published Apr 12 and the Bank is 'ready to act' should market-wide stress emerge.
• Very little reaction in both GoCs and FX, marginally extending a rally at the longer end but little change on the day and USDCAD holding near month lows.

Excerpt on floor for reserves “And when we began QT roughly a year ago, we also said we had decided to implement monetary policy using a floor system—or an ample reserve system—on a permanent basis. [...] The answer [what the ideal level might be] is not yet set in stone. We know it will be well below our current level of roughly $200 billion. Our best estimate is somewhere in the range of $20 billion to $60 billion, or roughly 1% to 2% of Canadian GDP. By comparison, the US Federal Reserve’s longer-run level of reserves needed has recently been estimated to be roughly 10% to 13% of US GDP.”