Home Economy The Bank of Canada will release the minutes of the meeting in an effort to increase transparency

The Bank of Canada will release the minutes of the meeting in an effort to increase transparency

by SuperiorInvest

The first roundup on February 8 will be the closest the public will ever get to a peek under the hood of how policy is made

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The Bank of Canada it is so poor at documenting what happens when its leaders sit down to discuss interest rates that it has given itself a failing grade among its peers.

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Monetary policy is done behind closed doors for obvious reasons. However, in the spirit of transparency, most major central banks publish the minutes of their meetings a few weeks after a decision is made. The Federal Reserve System in the United States goes so far as to publish full transcripts of meetings after five years.

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The Bank of Canada does no such thing. The governor might share a few words about what was discussed in an opening statement at the quarterly press conference that always follows the release of a revised outlook and interest rate decision. This includes four of the eight planned policy announcements. The other four are followed a day later by a speech by the governor or one of his deputies that updates the central bank’s thinking on the economy. The details of the policy discussion vary from speech to speech.

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Opacity is out of step with the times, and the Bank of Canada knows it. Earlier this year, a group of researchers that included Jeremy Harrison, the central bank’s chief communications officer, and Sharon Kozicki, the deputy governor, published message this gave the institution a score of three out of a possible 12 for meeting summaries and minutes, dead last behind a list of nine central banks. Bank of Japan scored the highest with a rating of 6.25.

But the Bank of Canada is going to catch up, at least partially.

The first decision of the year Jan. 25 will be followed two weeks later — on Feb. 8 — by a recap of the debate that led to Mackle’s decision. It will be the closest the public will ever get to peeking under the hood of how politics is done.

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“I congratulate them on this decision,” said Bank of Montreal Chief Economist Doug Porter. “I think it’s definitely a step in the right direction.”

The Bank of Canada has long endured criticism for its relatively closed approach to communications. The governor gives speeches and interviews fairly regularly, and his representatives tend to speak several times a year. But they are reluctant to share how the various decisions to raise or lower interest rates come about. The International Monetary Fund criticized them for this last year in a transparency review at the end of September that accompanied the recommendations.

It’s an idea that’s been around for a while… we felt it was time to do it

Tiff Mackle

The most notable proposal was to publish a detailed summary of monetary policy negotiations. The central bank agreed.

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“It’s an idea that’s been around for a while,” Mackle told the Financial Post’s Kevin Carmichael in December, adding that the IMF had been asked to participate. “They came back with that recommendation, so we felt it was time to do it.”

‘Hard to Judge’

The summaries should provide more detail on the views of the members of the Governing Council and give economists a better idea of ​​what is on the central bank’s radar and what their next move is – provided the summaries contain enough information. The central bank’s previous lack of transparency had some on Bay Street doubting that the Bank of Canada was really ready to pull back the curtain.

“It’s hard to judge without seeing the first set how this will make a meaningful difference or if it will actually help transparency in a significant way,” Porter said.

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The Bank of Canada has been embroiled in a spat with some of Bay Street’s leading economists, who describe policymakers as indifferent to the bets investors are making based on where they think interest rates are headed. Porter locked horns with the Bank of Canada in September 2017, when he called the central bank’s lack of communication ahead of its first hike in seven years an “epic failure”.

Bank of Canada Governor Tiff Macklem arrives for a press conference in Ottawa in March 2022.
Bank of Canada Governor Tiff Macklem arrives for a press conference in Ottawa in March 2022. Photo: Blair Gable/Reuters

Porter said the most interesting information that could come out of these meetings would be the extent to which MPs hold diverging views. He said he will also be keeping an eye on any economic indicators the governor’s lieutenants are focusing on.

But Porter also said quarterly outlooks and press conferences are already rich in detail, so the summaries may not move the needle as much. “A little more transparency is a good thing, and it will probably lead to a little more transparency,” Porter said. “But I don’t think it’s going to fundamentally change the way people like me evaluate what the Bank of Canada is going to do.”

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‘One Voice’

Bay Street and the Bank of Canada have repeatedly found themselves out of sync in recent years. Royce Mendes, head of macro strategy at Desjardins Group, went so far as to nickname Mackle the “mystery friend” in one of his client notes.

Mendes’ remark highlighted the consequences of a vague communication style, arguing that the secretive nature of the Bank of Canada’s plans has often confused markets. Economists at the National Bank documented in a January 23 note that the central bank defied market consensus at five out of eight meetings last year.

I don’t think it will fundamentally change the way people like me assess what the Bank of Canada is going to do

Doug Porter, Chief Economist, Bank of Montreal

A key difference between the Bank of Canada and the US Fed is governance. It’s easier for the Fed to release the minutes because each member of its policy committee has voted. The only member of the Bank of Canada’s policy committee who has a vote is Mackle, although by convention the members of the Board of Governors try to reach a consensus.

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“Questions arise as to how far decision-makers can deviate from speaking with ‘one voice’ and which parts of the deliberations could be shared to improve insight into the consensus-building process,” the Bank of Canada report said.

Mendes argued that Bank of Canada meeting summaries may not have the same value as Fed minutes because of this difference, as it would be difficult to match individual views. He advocated upheavals in the structure. “Why not move away from a system that seems somewhat archaic and based on a single monetary policy maker and move to a voting system to strengthen governance and increase transparency? Mendes said.

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Former Deputy Governor Lawrence Schembri also drew attention to this problem, writing that the central bank has taken two important steps to improve governance and transparency: recruitment of an external deputy governorand receiving meeting summaries. He said this could give the public a “better understanding” of policy decisions and make it somewhat easier to predict interest rates.

Still, Schembri said his former colleagues could have done much more.

“But while these reforms are helpful, they still leave the Bank of Canada behind its peers in terms of governance and transparency,” Schembri wrote, adding that other central banks publish projected rate hikes in line with the economic outlook. “That’s not currently the case in Canada.”

• By e-mail: shughes@postmedia.com | Twitter:

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