The Bank of Canada will start publishing summaries of its monetary policy meetings in an effort to improve transparency and shore up its credibility as it struggles to bring down high inflation.
The announcement on Wednesday was a response to a review of the central bank’s transparency practices by the International Monetary Fund. The summaries will be published about two weeks after each interest-rate decision by the bank’s governing council, starting with the meeting on Jan. 25.
The bank has been ramping up public outreach efforts in recent months to explain why it is rapidly increasing interest rates, and to persuade Canadians that today’s high inflation will eventually come back down. Officials have said they are concerned the surge in prices is undermining trust in the central bank – something that makes their job of controlling inflation more challenging.
The announcement moves the Bank of Canada closer to the U.S. Federal Reserve, which publishes detailed minutes of the rate-setting meetings of its Federal Open Market Committee (FOMC). However, it stops short of giving the same level of detail.
“We do expect it to provide a high-level summary of the issues discussed by [the] governing council, as well as insight into the key points of focus in their deliberations on economic developments and the risks,” Jeremy Harrison, managing director of the bank’s communications department, said in a statement.
The summaries won’t attribute arguments to individual members of the six-person governing council, Mr. Harrison said. And because the council does not formally vote on monetary policy decisions, no votes will be recorded.
This will differ from FOMC minutes, which specify how individual committee members voted – something that allows economists and market participants to get a sense of individual policy makers’ preferences. It also won’t include the kind of chart known as a “dot plot” in the Fed’s Summary of Economic Projections, which shows where the FOMC members expect the policy interest rate to be in the short and medium terms.
Still, the change is a significant step forward for transparency, said Stephen Gordon, an economics professor at Laval University.
“It’s been a long time that people have been calling for this. Usually the bank has sort of deflected it saying something like, ‘if the minutes were published then people would be afraid to speak their mind.’ I’ve never been persuaded by that,” Prof. Gordon said.
“Especially when there’s great uncertainty, that uncertainty should be reflected somewhere.”
The IMF review gave the bank good marks overall, saying it “sets a high benchmark for transparency.”
“The BOC monetary policy framework is comprehensive, transparent, and understandable, although there is room for greater transparency with respect to the policy deliberations,” the IMF said.
The IMF’s 10 recommendations also included disclosing more information about how auditors are chosen, increasing the frequency of the bank’s plain-language communication, and disclosing more information about meetings with other government agencies. The bank published a response to each suggestion, committing to several minor changes alongside the decision to publish summaries of monetary policy meetings.
Chris Ragan, an economics professor at McGill University, lauded the bank’s decision, although he called meeting minutes “pretty inside baseball stuff.”
“I don’t think it benefits the average Canadian in a direct way, because the average Canadian doesn’t think about monetary policy,” he said.
“I think it’s going to help the people who are the bank-watchers. Whether it’s me, or whether it’s a friend of mine who is a foreign-exchange trader. … And hopefully those benefits sort of trickle down because people end up writing better papers, or making better decisions about whether to buy bonds this week or not.”
Wednesday’s announcement is the latest effort to shake things up at the central bank as it deals with one of the most challenging monetary policy environments in decades.
Last month, the bank announced a new position on its governing council after the retirement of deputy governor Tim Lane. Rather than another full-time deputy governor, the bank is looking for a part-time council member who will be an outside voice and serve a two-year term. Governor Tiff Macklem said the change “provides an opportunity both to bring fresh and diverse perspectives” to the council.
The bank has also been increasing its efforts to speak directly to Canadians. It hired a social-media specialist, and has expanded its presence on Twitter. Earlier this week, it posted a short video on Twitter of Mr. Macklem explaining why the bank was increasing interest rates.
It has submitted opinion pieces by Mr. Macklem to newspapers, and is timing its officials’ speeches and media appearances to provide a kind of running commentary on Statistics Canada’s inflation data.
There are several reasons for the communications blitz. Given the high level of inflation and political debates over the cost of living, monetary policy is getting much more attention than usual. Bank officials have said they want to make sure their voice is heard amid hubbub.
It’s also to trying to persuade Canadians that inflation will not remain high forever. What businesses and individuals believe about future inflation can affect how they set prices and bargain for wages. If people expect permanently high inflation, that can cause a wage-price spiral. Once this sets in, central banks typically need to raise interest rates higher and slow down the economy more sharply to break that psychology.
In a speech last week, deputy governor Paul Beaudry said the bank could reduce the likelihood of a recession by communicating clearly and helping guide inflation expectations.
Mark Rendell