Many thanks to the Globe & Mail for printing my opinion piece, In this politicized climate, the Bank of Canada needs to be a lot better at communicating.
Assiduous Readers may well find part of the article oddly familiar … :
Transparency is also inadequate when announcing policy rate decisions. A recent staff discussion paper compared the bank’s disclosures with those of eight other major central banks. Of particular interest are the voting records (reporting on how committee members voted on the policy), and the diversity of views (reporting on which issues were considered important by a minority of members). The Bank of Canada was among five central banks that did not disclose voting records at all, and one of only three that provided no information regarding diversity of views.
This secrecy must end, together with the policy that decisions be reached via absolute consensus. Predictions are inherently uncertain and reporting of policy rate decisions needs to reflect this. Competent, confident members of the bank’s governing council will be pleased to occasionally accept minority status when they feel that an important point must be made; indeed, a recent article from the International Monetary Fund advocates that policy rate decisions should take a form similar to judicial decisions, with full space given to dissenting views.
This information will be of great value to investors as they form their own views and the resultant market information will in turn inform the bank’s decision-makers. Investors currently place undue confidence in central-bank pronouncements, leading to an echo-chamber effect in which the only feedback the bank receives from the market is a reflection of their most recent prediction.
Update, 2023-2-16: I received an answer to my inquiry to the Department of Finance:
Thank you for your correspondence of February 3, 2023 regarding Canada’s real return bonds (RRBs). The Government of Canada appreciates your interest in this topic and is always open to receiving views.
The Government reviews and assesses programs on a regular basis to ensure they continue to function as expected. As part of a 2019 review of the RRB program, the Government undertook extensive consultations, which showed poor demand for RRBs. This view was reinforced during the Fall 2022 Debt Management Strategy Consultations.
The consultation document for the RRB review, along with its summary, are available on the Bank of Canada’s website at bankofcanada.ca/2019/08/government-canada-real-return-bond-consultations/ and bankofcanada.ca/wp-content/uploads/2020/03/governement-canada-rrb-consultations-summary.pdf. A summary of the Fall 2022 consultations is also available on the Bank of Canada’s website at bankofcanada.ca/2022/11/fall-2022-debt-management-strategy-consultations/.
Market consultations are an integral part of forming the Government’s Debt Management Strategy. The Government seeks to maintain an open dialogue with stakeholders and highly values all the input received.
The 2022 Fall Economic Statement announced the decision to cease issuance of RRBs effective immediately. At this time, the Government is not considering a reintroduction of RRBs. All outstanding RRBs will continue to be honoured.
Thank you for contacting the Department of Finance Canada.
Sp, judging from this eMail, there were no estimates made regarding the excess cost, if any, of the RRB programme.
And on 2023-2-14, the Bank of Canada answered my question of 2023-02-04:
Does that Bank of Canada have any information available on the liquidity of Real Return Bonds in the period 2019-2022 (inclusive) and how this liquidity may be determined to affect the prices of these securities in the primary and/or secondary markets?
If so, how may I access this information?
Thank you for your follow-up inquiry and we apologize for the delayed response.
We regret we do not have the information you are looking for.
Update, 2023-2-17: My drafts for this piece included footnotes. I won’t publish the drafts, but here are the footnoted links:
Trump
Erdogan
Poilievre
Importance of public confidence
Confidence and Monetary Policy Transmission
Trust and Transparency
BoC on ‘Printing Money’
Poilievre on ‘Printing Money’
BoC on ‘Understanding Quantitative Easing’ See also Settlement Balances Deconstructed
BoE ‘Quantitative Easing’ and BoE ‘Understanding the Central Bank Balance Sheet’
Canadian Fixed-Income Forum
CFIF Minutes, 2022-11-29
GoC, Debt Management Strategy 2022-3
BoC, Real Return Bond Funding Review, 2003
Government of Canada Real Return Bond Consultations Summary (2019)
GoC RRB programme cancellation
BoC Transparency Comparison
Diverse views important
Can central banks talk too much?
spot on. however i will say this
for the first time in what seems like 20 yrs, the cent banks are at least in the ballpark of where monetary policy ought to be and they should be commended for that.
the seemingly endless assertion that there was no inflation was bonkers. a distinction between consumer inflation and asset inflation has to be better accounted for in setting policy. the inevitable pressures from mean reversion on what i refer to as the “houses/wages” equation is a big reason why inflation is going to prove anything but transitory.
and when markets start pricing rate resets off 5yrs being 3+ for an indefinite period, we will all be rewarded for our persistence
Congratulations on having this published, James.
I also learned a new word: pettifogging. That’s a useful concept to have a word.
“Pettifogging has damaged the bank’s credibility; it must instead address the issues in a forthright fashion when communicating with the public.”