(September 19 – 11:15 ET) – The Bank of Canada today outlined its plans for adopting fixed dates for announcing Bank Rate changes.
The Bank will adopt a system of eight fixed dates each year for announcing any changes to the official interest rate. Those dates are tentatively scheduled for the following: the third or fourth week of January: the first week of March: the third or fourth week of April: the last week of May; the third or fourth week of July; the last week of August; the third or fourth week of October; and the last week of November. The bank is proposing to make the announcements at 09:00 ET on either a Tuesday or Wednesday.
The bank plans to issue a press release providing guidance and insight into the Bank’s decision, whether or not there is a rate change. This will be similar to the bias announcements of the U.S. Federal Reserve Board that accompany its rate announcements, and is keenly watched by economists for signs of future action.
The bank also plans the integration of the system of eight announcements with other key monetary policy announcements throughout the year to, “provide a more regular, frequent, and continuous process of public communication on monetary policy”.
The bank’s plan is being released for comment. It expects to announce specific announcement dates for the upcoming year in late October through to the end of 2001. The new system will go into effect in November. The bank would still have the option of acting between fixed announcement dates, but only in the event of “extraordinary circumstances”.
The bank expects that adopting fixed announcement dates will improve the implementation and effectiveness of Canadian monetary policy. It believes fixed dates will reduce uncertainty in the markets associated with not knowing exactly when the bank might announce an interest rate change
Th bank says fixed announcements should also focus greater attention on the economic and monetary situation in Canada, put greater emphasis on the medium-term perspective that underlies monetary policy, and increase the bank’s transparency, accountability, and ongoing dialogue with the public.
The move to fixed announcement dates has generally been applauded by the Canadian financial community, and it puts the bank on par with the Fed, the Bank of England, the European Central Bank, the Bank of Japan, the Swedish Riksbank, the Reserve Bank of Australia, and the Reserve Bank of New Zealand.
-IE Staff