By Steve Scherer
OTTAWA (Reuters) – The Bank of Canada will provide the minutes of its policy-setting meeting this week for the first time in its history, some analysis Economists said the move would help restore credibility lost last year as inflation soared and encourage thinking outside the box.
Annual inflation surged to 8.1% in June, the highest level since 39 years and four times the Bank of Canada’s 2% target. In December, inflation slowed to 6.3%.
The Bank of Canada started raising rates in March, when its benchmark rate was at 0.25%, and most analysts expect another 25% increase The basis point was 4.5% through Wednesday’s meeting of the six-member governor’s council.
The so-called “summary of deliberations” of the meeting will be published on 8 February. Following advice from the International Monetary Fund, the Bank of Canada said in September it would release meeting minutes to improve transparency,
Other central banks including the Federal Reserve, Bank of England and European Central Bank have provided Some form of meeting minutes.
“Any time inflation is high – when it is not high for most of 39 to 39 – The institution’s credibility will take a hit,” said Jeremy Kronick, director of money and financial services research at the CD Howe Institute, a pro-business think tank. There’s a lot of groupthink going on,” Kronick said, so offering a glimpse into a policy meeting “may show people that there’s debate and deliberation.”
Groupthink is when individuals try to reach consensus A place to ignore potential problems or new ideas. Last year, global central banks initially believed that inflation would be “transient” or pass quickly.
Instead, supply chain difficulties persisted and economies struggled as restrictions eased Rebounding quickly, the outbreak of the war in Ukraine pushed up energy costs, causing most countries, including the Federal Reserve, to rush to raise interest rates and take measures to tame inflation.
Marc Marc, Chief Market Strategist, Bannockburn Global Forex LLC “The worst enemy of policymakers and investors is groupthink,” Chandler said.
Bank of Canada Governor Tiff Macklem acknowledged missteps last year and pledged more transparency. Glimpse of policy meeting comes at a delicate time as the bank tries to steer the economy to a “soft landing” rather than deep Recession.
Other market watchers said the release of the minutes was more of a public relations exercise than an effort to increase transparency.
“It’s mostly optical,” said Derek Holt, Scotiabank’s vice president of capital markets economics, adding that the minutes would be a “pretty modest step toward greater transparency.”
David Rosenberg, president and founder of Rosenberg Research, said the Bank of Canada doesn’t need to rebuild its credibility because “the inflation we’ve seen in the past Months were global”.
Instead, Rosenberg said: “It was a PR job, banks saying, ‘Look at us, we’ve become more transparent. ‘”
During his campaign to take over the party last year, Conservative leader Pierre Poilievre accused Macklem of letting inflation run amok and said he Should be fired.
A potential pitfall is that the minutes could introduce uncertainty to the overall message from the BoC.
Now, every Governing Council Individuals were “singing the same hymn”, but the minutes may suggest they were not, said global chief executive Kristina Hooper, a market strategist at U.S. asset manager Invesco.
“Sometimes one of the complaints about the Fed is that there are different voices saying different things … it creates confusion. ”
Since policy decisions are made by consensus rather than voting, “Summaries will not provide attribution of individual council members nor will votes be recorded as there are no votes in our system,” said Paul Badertscher, director of media relations at the bank.
In October, Macklem said the minutes would reveal the points discussed, the options and risks weighed, and how consensus was ultimately reached on why.
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Chart: A Year of Rate Hikes (https://inew.news/wp-content/uploads/2023/01/localimages/chart.png63cd65d090e84.png)