Communicating the Future Direction of Policy

Central banks all over the world publicly provide varying degrees of information on future monetary policy underlying their projections. Such information ranges from very little information about the path, to publishing a path based on financial market interest rate expectations or an endogenous reaction function. The IMF, in their Article IV recommendations, has suggested that the Bank should provide more information about the policy rate path that is in the projections published in their Monetary Policy Report. This note discusses several ways the BoC could increase communication around future policy, leveraging methods other central banks have used, and discussing the pros and cons of each method for the BoC, keeping in mind that policy rate forecasts typically are not informative beyond 1 or 2 quarters. In doing so, it is important to recognize that most central bank projections are conditioned on market expectations or mathematic representations of policy reaction functions that may or may not reflect policymaker views. In this context, the Bank could consider providing more details on the inputs to GC policy deliberations, including policy recommendations of Bank staff and senior advisors. However, caution should be taken in providing more information about policy rate paths (especially beyond the near term), since such information could direct more public focus on a forecast that is not informative or could be misinterpreted by the public.