IMF: Bank of Canada could improve communication on monetary policy

IMF Bank of Canada could improve communication on monetary policy

(Finance) – With inflation continuing to decline and economic activity weak, the Bank of Canada (BoC) has appropriately decided last week to start lowering the rate benchmark, thus becoming the first G7 central bank to begin normalizing policy. Monetary stance would still remain restrictive for a while, and quantitative tightening is expected to continue, with bonds exiting the BoC’s balance sheet as they mature. This is stated by International Monetary Fund (IMF).

“To better guide expectations while containing the perception of forward guidance, the BoC could also consider further strengthening the way you communicate its monetary policy intentions regularly, including by explaining how quickly the reference rate could return to neutral, clarifying how it sees market expectations regarding the evolution of the reference rate, or even – as done by many other major central banks – publishing the its policy rate path consistent with forecasts (the changes of which, from quarter to quarter, could help markets better understand how the BoC reacts to new data),” the report reads.

These possibilities, according to the IMF, would be based on the measures already taken to improve the transparencyincluding publishing summaries of the Governing Council’s deliberations and holding press conferences after each scheduled meeting.

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