Lack of Clear Indication on Future Key Interest Rate Changes Is Hurting Bank of Canada Communications

The fairly sudden monetary tightening in Canada over the summer led to a debate on the Bank of Canada’s (BoC) communications. While there is no denying that the spectacular rebound of the Canadian economy is an exceptional circumstance that warranted a change in the monetary policy stance, recent events bring to light some shortcomings in the communication process employed by Canada’s monetary authorities. Like many other central banks are already doing, the BoC should seriously consider starting to publish detailed minutes of the discussions surrounding each of its monetary policy meetings, rather than relying on short statements and speeches. Now that the effects of the financial crisis appear to be gradually dissipating, the BoC should also place greater emphasis on the medium term, particularly by disclosing the key interest rate path used for the Monetary Policy Report (MPR) economic scenario.