Governor of the Bank of Canada Tiff Macklem walks outside the Bank of Canada building in Ottawa.BLAIR GABLE/Reuters
Now that the Bank of Canada’s “Summary of Governing Council Deliberations” has had a few runs around the block, we have a better sense of what this shiny new communications tool delivers to the monetary policy conversation – and what it doesn’t.
And the answer, it appears, is not nothing, but less than hoped.
It colours in the margins of the picture we already have, but adds little to the picture itself. Its potential to provide a window into the internal conversations and tensions among the central bank’s arbiters of interest rates is, at this point, largely unfulfilled.
It is, unfortunately, non-compulsory reading.
Wednesday’s summary of deliberations – a synopsis of the governing council’s meetings that culminated in the April 12 decision to maintain the policy rate at 4.5 per cent – is the third such report since its debut in January. The bank introduced the summary in response to an assessment by the International Monetary Fund (IMF) last fall, which recommended that the bank be more transparent about the discussions leading up to its policy decisions. That IMF recommendation put a formal stamp on a long-standing complaint from the Bank of Canada critics: the bank’s persistent refusal to publish minutes of its policy-setting meetings, which left it at odds with its international peers.
The decision to finally relent, and start providing summaries of those meetings, looked like a big step forward. The actual content of those reports has been more of a baby step.
Wednesday’s six-page summary is largely a rehashing of key messages that the bank covered two weeks ago in the rate announcement, accompanying quarterly Monetary Policy Report and news conference. Since then, Bank of Canada Governor Tiff Macklem has held a roundtable discussion with reporters, participated in an armchair discussion at a think-tank event in Washington and testified to committees of the House of Commons and Senate. For anyone who follows the central bank closely, there was very little left in the summary of deliberations that the bank and its boss hadn’t already said.
On the central issue of the rate decision, the summary does hammer home that the bank still has further rate increases on the table; arguably, that point is stressed more than many readers might have expected. But the message is not new. Mr. Macklem said as much in his postannouncement news conference two weeks ago, when he stated that the “governing council discussed whether we’ve raised rates enough,” and “we are continuing to assess whether monetary policy is sufficiently restrictive to get inflation back to target.”
One could interpret this emphasis in the summary as indication that the governing council came closer to another rate hike than most observers thought. Or that, with the bank very clear that a rate cut is not on its table yet, the summary merely reflects that governing council naturally discussed each of the two options that remained: hold or hike. Or, that the summary has been crafted to emphasize the bank’s existing message that it’s still willing to restart rate hikes. Without further details of the discussion, it remains very open to interpretation.
Given where the bank landed in its decision, there must have been considerable dissension around any arguments in favour of further rate increases; after all, the consensus was to dismiss those arguments and hold steady. Yet the summary gives us no sense of that debate, or what swayed it – only that two options were considered, and one was chosen.
We certainly don’t know who said what; names of council members are distinctly not a part of the summary of the discussion, beyond a list of the attendees. (So, yes, we know that everyone on the council showed up.) If there are disagreements in the room, we don’t hear about them.
By long-standing practice, the governing council operates by consensus, and the consensus position is the only one that the bank reflects in policy communications. This was always the bank’s central argument against publishing detailed minutes of its policy-setting meetings. It is now quite clear, unfortunately, that this thinking extends to its summaries of the discussions leading to that consensus.
These deliberations, surely, are more lively than a half-dozen people nodding in unison. Yet the summary reports still only reflect faceless agreement, while glossing over disagreement.
That’s unfortunate. Knowing the factors on which members of the council don’t see eye-to-eye would reveal the tension points in the central bank’s policy stance, areas in which the consensus may be drifting toward change. A summary of deliberations that identified points on which there was dissent in the room would be much more valuable for anyone trying to assess where there was potential for movement in the bank’s policy stance – and where movement had evolved from one rate decision to the next.
To its credit, the Bank of Canada has, over the past decade, taken many steps to meaningfully expand its communications and improve its transparency. But it has done so incrementally; the jump to releasing deliberation summaries was a comparatively huge one. Perhaps, given time, the bank will gradually come around to being more candid in the details.
Until then, we can expect these deliberation summaries to elaborate on the bank’s position without much illuminating it. They will be more explanatory than revelatory. And that’s okay. It’s just not what it could have been.