October 30, 2014 – The Bank of Canada should consider publicly disclosing the discussions and dissenting opinions of members of its interest-rate-setting committee, according to a new C.D. Howe Institute report. In “Good Governance of Monetary Policy in Canada: Lessons from the C.D. Howe Institute’s Shadow Council,” authors Pierre Siklos and Matthias Neuenkirch argue that the existing governance structure of the Bank is out of step with international practices that have spread quickly over the past decade.
“Central banks in the US and England already release the minutes of their meetings,” states Siklos. “Withholding dissenting opinions has the potential to limit public understanding of important monetary policy questions.”
The authors examined the experience of the C.D. Howe Institute’s Monetary Policy Council (MPC), which convenes to discuss the Bank of Canada’s policy toward the overnight rate, the very short-term interest rate the Bank targets for monetary policy purposes, shortly before each of the Bank’s interest-rate announcements. The authors conclude that a diversity of opinions by MPC members does not appear to create any particular difficulties in setting the appropriate stance of monetary policy in Canada, nor do differences in views appear so large as to threaten the usefulness of the deliberations in providing informed opinion about monetary policy actions.
The authors recommend that revisions be made to The Bank of Canada Act, which currently deters senior officers from becoming more transparent and, consequently, more accountable. The publication of the deliberations of the Bank’s rate-setting committee, the Governing Council, could assist the Bank in communicating and understanding the kind of signals necessary to keep inflation on target.
Neuenkirch concludes: “With the suggested legislative changes, the Bank could continue to lead in promoting central bank transparency and accountability.”
The C. D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada's trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada's most influential think tank.
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For more information contact: Pierre Siklos, Professor of Economics, Wilfrid Laurier University; and Matthias Neuenkirch, Assistant Professor of Economics,University of Trier, Germany. Phone: 416-865-1904 Ext. 9997; E-Mail: kmurphy@cdhowe.org.