OTTAWA, Sept 19 (Reuters) – Even though the Bank of Canada takes rate decisions on a consensus basis, this does not mean governing council members all share the same view on the path for rates, deputy governor Nicolas Vincent said on Thursday.
The six-member council, which includes Governor Tiff Macklem, announces interest rates eight times a year. Each decision is unanimous.
“Reaching a consensus does not mean that all members of Governing Council share the same point of view on the economic outlook or the path for interest rates in the coming months,” Vincent said in a speech in Sherbrooke, Quebec.
“It means that members come to an agreement about the best decision to make at a particular moment in time.”
Vincent, one of the council’s six members, said that as new data were published and fresh information came to light, differences of opinion tended to become less pronounced.
Vincent’s speech, on what happens behind the scenes in monetary policy decision making, was part of the central bank’s efforts to be more transparent.
The BoC has trimmed its key policy rate three times in a row down to 4.25% after it started an easing cycle in June.
Money markets see an almost 56% chance of a 50 basis point rate cut in October and are fully pricing in another 25 basis point cut in December.
The BoC has been trying hard over the few years to improve transparency and communicate its decisions more succinctly, especially as public unhappiness over rising rates and spiking inflation grew.
Vincent though said communications were not always easy.
“For example, at the July decision, we said downside risks to inflation were becoming increasingly important in our deliberations. Some people interpreted this to mean that we believed downside risks had strengthened,” he said.
“What we intended to communicate, however, was that, with the 2% target in sight, we gave increased consideration to the risk that inflation could fall below the target.”
(Reuters Ottawa editorial)
