The Bank of Canada is set to publish its first summary of deliberations Wednesday, giving Canadians a peek into the governing council’s reasoning behind its decision to raise interest rates last month.
Following a recommendation from the International Monetary Fund, the central bank announced in September that it would begin releasing summaries about two weeks after an interest rate decision starting in 2023 in an effort to improve transparency.
“I think it’s a good idea. Most major central banks do release some kind of minutes or meeting summaries,” said Douglas Porter, BMO’s chief economist.
The Bank of Canada raised its key interest rate for the eighth consecutive time since March on Jan. 25, bringing it to 4.5%. At the time, the central bank signalled it would be taking a pause on any further hikes to let the impact of its aggressive hiking cycle sink in.
Wednesday’s summary is expected to shed light on what the governing council discussed while making that decision.
Giving insight into the deliberations is already common practice at the U.S. Federal Reserve, where meeting minutes are released three weeks following an interest rate decision.
Although the minutes can be insightful, Porter said they typically aren’t market-moving and instead serve as historical record.
The Bank of Canada hasn’t said much about what the summaries will look like, leaving the depth and format to be discovered on Wednesday.
But Porter said he isn’t expecting them to match up with the detail offered by the Federal Reserve’s meeting minutes.
The Bank of Canada’s governing council is responsible for the central bank’s monetary policy and consists of the governor, senior deputy governor and four deputy governors. Unlike the Federal Reserve, where the 12 members vote on interest rate decisions, the governing council’s decisions are consensus-driven.
That means all members of the governing council come to the same decision at the end of deliberations.
Faced with higher borrowing costs, Canadians and businesses are expected to continue to pull back on spending in 2023, thereby slowing the economy and inflation.
Price growth has slowed in recent months but inflation is still well above the Bank of Canada’s 2% target. In December, the annual inflation rate was 6.3%.
After its quarter of a percentage point hike last month, the Bank of Canada made it clear that the pause on future rate hikes was conditional, keeping the door open to more increases if inflation isn’t tamed.
According to its latest monetary policy report, the central bank expects inflation to slow faster than it had previously anticipated. It’s forecasting the annual inflation rate will fall to 3% by mid-2023 and to its 2% target in 2024.
Central banks around the world have also been raising rates as countries struggle with high inflation.
Last week, the Federal Reserve hiked its key interest rate by a quarter percentage point and signalled more rate hikes should be expected. Meanwhile, the European Central Bank announced a half percentage point rate hike and said it will raise rates at least one more time.
Porter said the main question he’s hoping to see answered in the summary is whether the Bank of Canada is pausing interest rate hikes, or if they’re planning on jumping back in.
“It’ll be interesting to see whether they’re really set on staying on the sidelines, or whether this truly is just sort of a temporary waystation.”
“Maybe this summary could could help answer that question a little.”