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What to Look for in the Bank of Canada’s First Summary of Deliberations This Week
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The Canadian Press
Nojoud Al Mallees
Published on 02/06/2023 • 3 minutes reading time
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OTTAWA — The Bank of Canada will release its first summary of deliberations on Wednesday, giving Canadians a glimpse into the reasoning behind the Governing Council’s decision to raise interest rates last month.
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On the recommendation of the International Monetary Fund, the central bank announced in September that it would start publishing summaries about two weeks after a rate decision from 2023 to improve transparency.
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“I think that’s a good idea. Most major central banks publish minutes or summaries of meetings,” said Douglas Porter, BMO’s chief economist.
The Bank of Canada raised interest rates on January 25 to 4.5 percent for the eighth consecutive time since March. At the time, the central bank signaled that it would pause further rate hikes to let the effects of its aggressive rate hike cycle sink in.
Wednesday’s summary is expected to shed some light on what the Governing Council discussed in making this decision.
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Providing insight into deliberations is already standard practice at the US Federal Reserve, where minutes of meetings are released three weeks after an interest rate decision.
Although the logs can be insightful, Porter said they aren’t typically market-moving, instead serving as a historical record.
The Bank of Canada hasn’t said much about what the summaries will look like, revealing the depth and format of Wednesday’s summaries.
But Porter said he doesn’t expect them to match the details offered in Federal Reserve meeting minutes.
The Bank of Canada Board of Governors is responsible for central bank monetary policy and consists of the Governor, 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.
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This means that all members of the Governing Council come to the same decision at the end of the deliberations.
With higher borrowing costs, Canadians and businesses are expected to cut spending further 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 percent.
After raising rates by a quarter of a point last month, the Bank of Canada made it clear that the pause in future rate hikes was conditional, leaving the door open for further hikes if inflation is not tamed.
According to its latest monetary policy report, the central bank expects inflation to slow faster than previously expected. It forecasts that the annual inflation rate will fall to 3 percent by mid-2023 and to its 2 percent target by 2024.
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Central banks around the world have also hiked interest rates as countries grapple with high inflation.
Last week, the US Federal Reserve raised interest rates by a quarter of a point, signaling that further rate hikes are on the cards. Meanwhile, the European Central Bank announced a half a percentage point hike in interest rates and said it will raise rates at least once more.
Porter said the main question he hopes to see answered in the summary is whether the Bank of Canada will suspend rate hikes or plan to do so again.
“It will be interesting to see if they’re really keen on staying on the sidelines or if this is really just some kind of temporary stopover.”
“Perhaps this synopsis could help answer that question a little.”
This report from The Canadian Press was first published on February 6, 2023.
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