The Bank of Canada is eager to be more transparent, but it isn't ready to explicitly foreshadow every interest-rate move it makes just to appease financial markets, deputy governor Carolyn Wilkins says.
"Only moving when everybody knows that is what you're going to do, I don't think it leads to good policy outcomes or good inflation targeting, and that's what we're accountable for," Ms. Wilkins said Thursday.
She added that the bank would not want to do anything that "would pre-empt … in any way" the work of the bank's governing council, which meets eight times a year to set the bank's benchmark overnight interest rate.
Controversy about the Bank of Canada's communications style was reignited earlier this month after the central bank announced a surprise quarter-percentage-point rate hike – to 1 per cent from 0.75 per cent.
The move caught many analysts off guard and sparked a sharp runup in the value of the dollar. Bank of Montreal chief economist Douglas Porter called out the bank for its "failure to communicate" during the eight week leadup to the September rate hike, calling the lapse "epic."
The central bank took the unusual step of publicly defending its silence before the decision. Spokesman Jeremy Harrison said fresh data showing the economy surged at a 4.5-per-cent pace in the second quarter came while bank officials were in a self-imposed quiet period before the Sept. 6 announcement.
Mr. Harrison also argued that financial markets had priced in a 50-50 chance of a rate hike before the bank moved. That suggests that many trading desks "were correctly interpreting the bank's prior messaging," he said.
But speaking after a day-long Bank of Canada conference in Ottawa, Ms. Wilkins acknowledged the bank is open to exploring various options to boost transparency, including a suggestion that it publish the expected future path of its key interest rate.
"That requires some thought," Ms. Wilkins said.
"It's worthwhile to look into it and think about what might be useful … to add the kind of clarity that could be useful in terms of credibility, anchoring expectations and avoiding volatility that may be unproductive."
Several participants at the event urged the central bank to be more open about where interest rates are headed.
Economist Lars Svensson, a former deputy governor of Sweden's central bank, urged the Bank of Canada to explicitly forecast the direction of its benchmark interest rate.
"You're hiding the most important piece of information if you're not doing that," argued Mr. Svensson, now a professor at the Stockholm School of Economics.
Former U.S. Federal Reserve Board economist Andrew Levin likewise said the Bank of Canada should "think hard" about instituting a more open and Fed-like decision-making process for setting monetary policy.
Confusion about the bank's intentions can lead to unwanted "contagion" in financial markets, said University of Toronto economist Michelle Alexopoulos. She added that the bank should convey its "forward thinking" as best as possible.
Other speakers, however, applauded the bank's communications efforts, particularly its explicit commitment to keep inflation at or near 2 per cent.
Complaints about the bank's communications have popped up sporadically since Governor Stephen Poloz abandoned the practice of providing explicit "forward guidance" about where rates are headed.