testing to date suggests that on rrp operations have generally been successful in establishing a soft floor for money market interest rates. 6 the fed could also employ other tools, such as term deposits issued through the term deposit facility and term rrps, to help drain reserves and put additional upward pressure on short - term interest rates. we have been testing these tools and believe they would help support money market rates, if needed. finally, with regard to balance sheet normalization, the fomc has indicated that it does not anticipate sales of agency mortgage - backed securities, and that it plans to normalize the size of the balance sheet primarily by ceasing reinvestment of principal payments on its existing securities holdings when the time comes. as illustrated in figure 4, cumulative repayments of principal on our existing securities holdings from now through the end of 2025 are projected to be about $ 3. 2 trillion. as a result, when the fomc chooses to cease reinvestments, the size of the balance sheet will naturally decline, with a corresponding reduction in reserve balances. see board of governors of the federal reserve system ( 2014 ), “ federal reserve issues statement on policy normalization principles and plans, ” press release, september 17. policymakers have discussed benefits and costs of an on rrp facility. for further discussion on this topic, see, for example, the fomc minutes for june 2014, july 2014, and january 2015 available on the board ’ s webpage “ federal open market committee : meeting calendars, statements, and minutes ( 2009 – 2015 ) “ ; and josh frost, lorie logan, antoine martin, patrick mccabe, fabio natalucci, and julie remache ( 2015 ), “ overnight rrp operations as a monetary policy tool : some design considerations ( pdf ), ” finance and economics discussion series 2015 – 010 ( washington : board of governors of the federal reserve system, february ). bis central bankers ’ speeches conclusion i will close by highlighting that the fed ’ s asset purchases have been a critical means by which the fomc has provided policy accommodation at the zero lower bound on nominal interest rates. in other words, the fed – and other central banks – can implement an expansionary monetary policy even when the policy interest rate is at the zero lower bound. the current high level of securities holdings will present some challenges for policy normalization, but we are confident that we have the tools necessary to remove accommodation at the appropriate

david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, to the senate banking, trade and commerce committee, ottawa, ontario, 25 october 2006. * * * good afternoon, mr. chairman and members of the committee. we appreciate the opportunity to meet with this committee twice a year, following the release of our monetary policy reports. these meetings help us keep senators and all canadians informed about the bank's views on the economy, and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before this committee last may, shortly after the release of our spring monetary policy report, we noted that the global economy had shown a little more momentum than had been anticipated : oil prices at that time were higher than previously assumed and metals prices had risen significantly. at that point, we were anticipating economic growth of about 3. 1 per cent this year, 3. 0 per cent in 2007, and 2. 9 per cent in 2008. things have changed somewhat since then. while global economic growth is expected to be a little higher than anticipated last spring, a weaker near - term outlook for the u. s. economy has curbed the near - term prospects for canadian exports and growth. the bank's outlook for growth in the canadian economy has been revised down slightly from the outlook in last april's monetary policy report and the july update of that report. the bank's base - case projection now calls for average annual gdp growth of 2. 8 per cent in 2006, 2. 5 per cent in 2007, and a return to 2. 8 per cent in 2008. weakness in labour productivity growth has led the bank to lower its assumption for potential growth to 2. 8 per cent for the 2006 - 08 period. together, these factors imply that the small amount of excess demand now in the economy will be eliminated by mid - 2007. core inflation is expected to remain a bit above 2 per cent in the coming months but return to the 2 per cent target by the middle of 2007 and remain there through to the end of 2008. lower energy prices have led to a downward revision of the near - term projection for total cpi inflation. total inflation ( which includes the temporary impact of the gst reduction ) will likely average about 1 1 / 2 per cent through the second quarter of 2007 before returning to the 2 per cent target and remaining there through to the end of 2008. as we noted at