Authors: Promit Mukherjee and David Ljunggren
OTTAWA, Sept 19 (Askume) – The Bank of Canada makes interest rate decisions by consensus, but that does not mean governing council members have a negative outlook on interest rates, Bank of Canada Deputy Governor Nicholas Vincent said on Thursday.
The six-member board, which includes Governor Steve McCallum, announces rates eight times a year. Each decision was unanimous.
“Consensus does not mean that all members of the Governing Council share the same view on the economic outlook or the path of interest rates in the coming months,” Vincent said in a speech in Sherbrooke, Quebec.
“This means that members agree on the best decision to make at any given time.”
“As new data is released and new information comes to light, the differences tend to diminish,” said Vincent, one of six members of the committee.
Vinson’s speech focused on what happens behind the scenes of monetary policy decisions and was part of the central bank’s efforts to increase transparency.
Since the easing cycle began in June, the Bank of Canada has cut its key policy interest rate three consecutive times, bringing it to 4.25%.
Money markets have put the probability of a 50 basis point rate cut in October at around 56% and a 25 basis point rate cut in December at about 59%.
The Bank of Canada has been trying to be more transparent and explain its decisions more succinctly for several years, especially as public discontent has grown over rising interest rates and rising inflation.
But communication isn’t always easy, Vincent said.
“For example, in the July decision, we indicated that downside risks to inflation were becoming increasingly important in our deliberations. Some interpreted this to mean that we believe downside risks have intensified,” he said.
“However, we would like to point out that as the 2% target approaches, we are giving greater consideration to the risk that inflation could fall below the target.”
(Askume Ottawa editorial)
Keywords: Canadian CE Bank/
