Greater Transparency Needed
Angelo Melino () and
Michael Parkin ()
No 102, e-briefs from C.D. Howe Institute
Financial market participants would benefit from a better understanding of how the Bank of Canada sets the overnight interest rate in response to economic developments. More accurate forecasts of the Bank’s future policy choices would lead to better financial decisions and better price and wage-setting decisions, making it easier for the Bank to hit its 2 percent inflation target. Currently, the Bank’s internal model predicts a path for the overnight rate that is inconsistent with the expectations of the Bank’s Governing Council. The Bank could achieve greater transparency by publishing its own conditional forecasts of the future path of the overnight rate or, failing that, by publishing such forecasts with a six-month lag. This would enable market participants to better understand what these forecasts mean and how to use them in economic decision-making.
Keywords: Monetary Policy; Bank of Canada; overnight interest rate; inflation target (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Published on the C.D. Howe Institute website, July 2010
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Persistent link: https://EconPapers.repec.org/RePEc:cdh:ebrief:102
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