bank of canada It is set to publish the first summary of its deliberations on Wednesday, giving Canadians an idea of the reasoning behind the Governing Council’s decision. Rate of interest last month.
Following a recommendation from the International Monetary Fund, the central bank announced in September that it would start releasing the summary about two weeks after interest rate decisions starting in 2023 in an effort to improve transparency.
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“I think it’s a good idea. Most major central banks release some sort of minutes or meeting summaries,” said Douglas Porter, chief economist at BMO.
The Bank of Canada raised its key interest rate for the eighth consecutive time since March to 4.5 per cent on January 25. At the time, the central bank indicated it would pause on any further hikes to let the effects of its aggressive hiking cycle sink in.
Wednesday’s summary is expected to shed light on what the Governing Council discussed while making the decision.
Giving insight into deliberations is already common practice at the US Federal Reserve, where meeting minutes are released three weeks after an interest rate decision.
Although the minutes can be practical, Porter said they are generally not market-movers and instead serve as historical records.
While the Bank of Canada hasn’t said much about what the summary will look like, the depth and format of the summary will be explored on Wednesday.
But Porter said he is not expecting that to match the details of the minutes of the Federal Reserve meeting.
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The Governing Council of the Bank of Canada is responsible for the monetary policy of the central bank and consists of the Governor, Senior Deputy Governor and four Deputy Governors. Unlike the Federal Reserve, where 12 members vote on interest rate decisions, the Governing Council’s decisions are governed by consensus.
This means that all the members of the Governing Council come to the same decision at the end of the deliberations.
Faced with higher borrowing costs, Canadians and businesses are expected to pull back on spending in 2023, slowing the economy and inflation.
Price increases have slowed in recent months, however, inflation is still well above the Bank of Canada’s two per cent target. The annual inflation rate in December was 6.3 per cent.
Following its quarter per cent hike last month, the Bank of Canada made it clear that future rate hikes were conditional, leaving the door open for more increases if inflation was not brought under control.
According to its latest monetary policy report, the central bank expects inflation to slow faster than previously thought. It is predicting that the annual inflation rate will fall to three percent by mid-2023 and to its two percent target in 2024.
Central banks around the world are also raising rates as countries grapple with high inflation.
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Last week, the Federal Reserve raised its key interest rate by a quarter percentage point and indicated that more rate hikes should be expected. Meanwhile, the European Central Bank announced a hike of half a percentage point and said it would raise rates at least once more.
Porter said the main question he expects to see answered in the summary is whether the Bank of Canada is holding off on raising interest rates, or if they plan to jump back.
“It will be interesting to see whether they are really set to stay on the sidelines, or whether this is really just a temporary move.”
“Perhaps this summary can help answer a little of that question.”
© 2023 The Canadian Press