Bank of Canada Rate Decisions

OTTAWA, Sept 19 (Reuters) – Despite the Bank of Canada making rate decisions on a consensus basis, this does not imply that all members of the governing council share the same view regarding future rates, according to deputy governor Nicolas Vincent.

The six-member council, which includes Governor Tiff Macklem, announces interest rates eight times a year. While each decision is unanimous, Vincent emphasized that reaching a consensus means the members agree on the best decision at a particular moment, rather than sharing identical perspectives on the economic outlook.

Vincent noted that as new data is available, differences in opinion among members typically diminish. His speech, aimed at increasing transparency in monetary policy decision-making, discussed the council’s internal processes.

Recently, the Bank of Canada (BoC) has lowered its key policy rate three consecutive times, bringing it down to 4.25% following the initiation of an easing cycle in June. According to money markets, there’s a nearly 56% probability of a 50 basis point rate cut in October, along with expectations for an additional 25 basis point cut in December.

In light of rising public dissatisfaction over increasing rates and inflation, the BoC has been striving to enhance communication and transparency over the past few years. However, Vincent acknowledged that effective communication can be challenging.

For instance, during the July decision, the council stated that downside risks to inflation were becoming increasingly important. While some interpreted this to mean that the council believed these risks had strengthened, Vincent clarified that it was intended to convey a heightened consideration for the risk of inflation falling below the 2% target.

(Reuters Ottawa editorial)