OTTAWA — The Bank of Canada will release its first summary of proceedings on Wednesday, giving Canadians a glimpse of the reasoning behind the Board of Governors’ decision to raise interest rates last month.
On the recommendation of the International Monetary Fund, the central bank announced in September that it would start publishing summaries about two weeks after a 2023 rate decision to improve transparency.
“I think that’s a good idea. Most major central banks publish some kind of minutes or summary of meetings,” said Douglas Porter, chief economist at BMO.
The Bank of Canada raised interest rates on January 25 to 4.5% for the eighth consecutive time since March. At the time, the central bank indicated that it would suspend any further rate hikes to let the effects of its aggressive rate hike cycle play out.
Wednesday’s summary should shed some light on what the Board of Governors discussed in making this decision.
Providing insight into deliberations is already standard practice at the US Federal Reserve, where meeting minutes are released three weeks after an interest rate decision.
While logs can be insightful, Porter said they weren’t usually market moves, but rather served as a historical record.
The Bank of Canada didn’t say much about what the summaries will look like, revealing the depth and format of Wednesday’s summaries.
But Porter said he did not expect them to match the details offered in the Federal Reserve meeting minutes.
The Board of Governors of the Bank of Canada is responsible for central bank monetary policy and consists of the Governor, Deputy Governor and four Deputy Governors. Unlike the Federal Reserve, where all 12 members vote on interest rate decisions, Board of Governors decisions are based on consensus.
This means that all members of the Board of Governors arrive at the same decision at the end of the deliberations.
With higher borrowing costs, Canadians and businesses are expected to cut spending further in 2023, which will slow the economy and inflation.
Price growth has slowed in recent months, but inflation remains well above the Bank of Canada’s 2% target. In December, the annual inflation rate was 6.3%.
After raising rates by a quarter point last month, the Bank of Canada made it clear that the pause in future rate hikes was conditional, leaving the door open for further hikes if inflation is not mastered.
According to its latest monetary policy report, the central bank expects inflation to slow faster than expected. It projects the annual inflation rate to fall to 3% by mid-2023 and to its target of 2% by 2024.
Central banks around the world have also raised interest rates as countries grapple with high inflation.
Last week, the US Federal Reserve raised interest rates by a quarter point, signaling that further rate hikes are in store. Meanwhile, the European Central Bank announced a half-percentage-point hike in interest rates and said it would hike rates at least one more time.
Porter said the main question he hopes to see answered in the summary is whether the Bank of Canada will suspend rate hikes or plans to do so again.
“It will be interesting to see if they really want to stay away or if this is just some sort of temporary stopover.”
“Perhaps this synopsis could help answer that question a bit.”
This report from The Canadian Press was first published on February 6, 2023.
Nojoud Al Mallees, The Canadian Press
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