Bank of Canada will publish minutes of meeting for first time
2023.01.22 12:51
Bank of Canada will publish minutes of meeting for first time
By Ray Johnson
Budrigannews.com – For the first time in its history, the Bank of Canada will publish the minutes of its policy-setting meeting this week. According to some analysts, this will help restore the credibility that was lost last year amid soaring inflation and encourage unconventional thinking.
In June, annual inflation reached 8.1%, four times the Bank of Canada’s target of 2%. This was the highest rate in 39 years. Inflation slowed to 6.3% in December.
When the BoC’s benchmark interest rate was 0.25 percent in March, most analysts anticipate another quarter-point rate increase to 4.5 percent when the six-member governor council meets on Wednesday.
On February 8, the meeting’s so-called “summary deliberations” will be published. The Bank of England (BoE), the Bank of England (BoE), and the European Central Bank (ECB) all provide some form of meeting record, and the BoC stated in September that it would release minutes to improve transparency on the recommendation of the International Monetary Fund.
Jeremy Kronick, director of monetary and financial services research at the C.D. Howe Institute, a pro-business think tank, stated, “The credibility of the institution is going to take a hit anytime inflation is high – and when it’s been not high for the better part of 30 years to 40 years.”
Kronick stated that providing a glimpse into the policy meeting “might allow people to see that there were debates and deliberations,” as one of the criticisms leveled at central bankers over the past year was “that there was a lot of groupthink happening.”
Groupthink is when people try to reach a consensus while ignoring potential issues or novel ideas. At first, central banks around the world believed that inflation would pass quickly last year.
Instead, difficulties in the supply chain persisted, economies quickly recovered after restrictions were lifted, and the outbreak of war in Ukraine raised energy costs, prompting most people, including the Federal Reserve of the United States, to rush to raise rates and control inflation.
Marc Chandler, chief market strategist at Bannockburn Global Forex LLC, stated, “Groupthink is the big enemy for policymakers and investors.”
The previous year, BoC Governor Tiff Macklem made an admission of mistakes and promised increased transparency. The bank is attempting to steer the economy toward a “soft landing” rather than a deep recession, so the glimpse into the policy meetings comes at a delicate time.
“P.R. JOB” According to other market watchers, publishing minutes is more of a PR exercise than an effort to increase transparency.
Derek Holt, Scotiabank’s vice president of capital markets economics, said, “It’s mostly optics.” He also said that the minutes will be “a pretty tepid step” toward more transparency.
David Rosenberg, president and founder of Rosenberg Research, stated that “the inflation we saw in the past 18 months was global” and that the BoC does not need to rebuild credibility.
Rosenberg, however, stated: It’s a job in public relations in which the bank announces, “Look at us, we’re becoming more transparent.”
During his campaign for party leadership last year, Conservative leader Pierre Poilievre said Macklem should be fired because he allowed inflation to get out of hand.
The minutes’ potential to cast doubt on the BoC’s overall message is one potential drawback.
According to Kristina Hooper, Chief Global Market Strategist for Invesco, a U.S. asset manager, everyone on the governing council “is singing from the same hymnal” at this point. However, the minutes may demonstrate that this is not the case.
“One of the things that people sometimes say about the Fed is that there are different voices saying different things, which can make things confusing.”
According to Paul Badertscher, the bank’s director of media relations, “the summary won’t provide attribution to individual council members, nor will it record votes because there are no votes in our system.” Policy decisions are made through consensus rather than vote.
Macklem said in October that the minutes would show the most important points that were discussed, the options and risks that were considered, and then how and why a consensus was reached.
