Governor of the Bank of Canada Tiff Macklem walks outside the Bank of Canada building in Ottawa, on June 22, 2020.BLAIR GABLE/Reuters
At a time when the Bank of Canada’s decision-making is about as big a topic of public interest as it has ever been, the institution will finally let us see behind the closed door where its governing council deliberates on interest rates.
Through a carefully managed peephole, mind you. Yes, the central bank wants to be more transparent. But despite years of criticism and in the midst of its biggest credibility problem in decades, it still doesn’t want to be that transparent.
On Wednesday, the central bank responded to a report card from the International Monetary Fund on its transparency by pledging to publish “a summary of deliberations” after each interest rate decision, shedding new light on the internal workings of the bank’s eight-times-a-year policy updates.
The move, which takes effect at the beginning of next year, addresses an area where the Bank of Canada has fallen far behind global best practices in disseminating monetary policy. It has for far too long maintained secrecy about the actual discussions that its top policy makers have in reaching their rate decisions, even when the rest of the world’s major central banks have willingly published the details of their own such deliberations.
But if you thought you were about to get up close and personal with the members of the governing council (Governor Tiff Macklem and, currently, four deputy governors, with one spot vacant) as they debate the crucial path of interest rates, you’re going to be disappointed.
Jeremy Harrison, the bank’s managing director of communications, told reporters that the document will be a “high-level summary” of the council’s discussions, rather than anything approaching a formal transcript of its meetings.
“Given our consensus-based decision-making system, the summary won’t provide attribution to individual council members, nor will it record votes because there are no votes in our system,” he said.
So, then, more like a courtroom artist’s sketch than an unfiltered view.
It falls short of the decision-making transparency of most of the Bank of Canada’s leading global peers, which publish transcripts or minutes of their meetings, and publicly record the votes of each committee member.
The Bank of Canada has long argued that its behind-closed-doors approach allows the individuals who make up the governing council to speak candidly, toss out thoughts and kick ideas around – unfettered by having every word recorded for posterity. If you don’t have to worry about an audience, the thinking goes, the result will be a freer exchange of ideas that just might result in better decision-making.
The bank’s reluctance in this regard – even as it has, by the IMF’s reckoning, made great strides in its transparency in other elements of its communication – is rooted in the very structure of the central bank’s top ranks, as established under the Bank of Canada Act nearly a century ago.
By law, the governor has the sole and final say on monetary policy. The governing council in its current form was an innovation of then-head Gordon Thiessen in the 1990s, designed to democratize the policy-making process to some degree. By convention, decisions are reached by consensus; but officially, only the governor has a vote.
That’s very different from, say, the Federal Reserve or the Bank of England, where the head of the bank holds just a single vote on a larger committee (12 members at the Fed, nine at the BoE).
While one can understand how the Bank of Canada’s structural difference has impacted transparency, that’s not to say that they can any longer be considered justifiable.
We are going through one of the most complicated and divisive periods in modern central-banking history – a time when elected officials and the general public are increasingly questioning the wisdom and even the motives of central bankers. And yet we know far too little about the individuals on whom we are relying to determine monetary policy, and the viewpoints they are bringing to bear on those decisions.
Yes, the deputy governors all make public speeches, but their critical viewpoints on policy remain faceless. The bottom line of those speeches is to repeat the bank’s formal policy position as stated in the most recent rate announcement. Once the members of the governing council emerge from their locked room with their official consensus, they speak as one.
We know shockingly little about, say, how Sharon Kozicki’s views on the pace of rate increases differ from Toni Gravelle’s. We have no sense of whether Paul Beaudry and Carolyn Rogers see eye to eye on the risks of overindebted households in the current rate environment.
The black box of policy making has become an obstacle to the central banks’ credibility, as it works feverishly to not only fight inflation, but convince the Canadian public that it can win the fight, and that it has their best interests in mind. Two and a half years of policy extremes, of uncertainty and of an inflation problem that went unchecked for too long have cultivated distrust.
The bank needs to lift the curtain and be willing to be totally up-front with those doubters, to share not only its consensus views, but the compelling, passionate dissenting opinions that colour them. It needs to put more human faces on its process – even if those faces don’t always agree.
Wednesday’s announcement falls short. But it’s a step in the right direction.