(September 14 – 15:45 ET) – The Bank of Canada is moving to a policy of preset dates for interest rate announcements, Gordon Thiessen, governor of the Bank told the Calgary Chamber of Commerce today.
The new system will be adopted in the autumn, with the first date for interest rate action set for November 2000. The bank will set eight specified dates per year for rate announcements, based on the timing of the flows of economic information that the bank relies on.
The eight dates would be separated from U.S. policy action dates by a week or more. On each announcement date, the bank will issue a press release that will give a brief assessment of the economic situation in Canada and explain why it chose either to change interest rates or to leave them unchanged.
The bank will be consulting interested parties to choose the most appropriate day of the week and time of day for announcements.
Thiessen lamented that some observers conclude that Canadian monetary policy simply apes U.S. moves. He argued that this is not the case, and that fixed policy announcements will help clarify that. “We have concluded that preset dates for announcing interest rate actions would improve the implementation and effectiveness of Canadian monetary policy.”
He argued that the new protocol will reduce uncertainty in financial markets about the timing of policy actions, and it will help to focus public attention more closely on domestic economic trends. Arguments that echo those of the C.D. Howe Institute.
“In the end, if the Bank does its job of keeping people well informed, we expect that economic analysts, market participants, and the public generally will be clearer about the factors that influence monetary policy and will be in a better position to anticipate the direction of policy,” said Thiessen.
-IE Staff