Experts Disagree on Whether the Bank of Canada Should Release its Interest
Rate Projections: C.D. Howe Institute

TORONTO, Oct. 21 /CNW/ - Leading economists disagree as to whether the Bank of Canada should publicize its forecasted interest rates, according to a study released today by the C.D. Howe Institute. In "Faceoff: Should the Bank of Canada Release its Projections of the Interest Rate Path? - The Cases For and Against," members of the Institute's Monetary Policy Council, Pierre Siklos, Professor of Economics at Wilfrid Laurier University, and Andrew Spence, Global Head of Rates and Foreign Exchange Research, TD Securities, offer opposing viewpoints.

Siklos favours the Bank's publishing a conditional interest rate forecast. Transparency about the forward track can produce realistic expectations and clearer indications of the future direction of asset prices, he argues. Furthermore, making forward track projections public would improve policy coherence and influence perceptions about how the Bank decides on its actions.

In Spence's view, on the other hand, it is unclear whether releasing the interest rate path forecast would result in better monetary policy, either with respect to communications or outcomes. Given the conditional nature of forecasts that are generated by complex macro-models, releasing the forecasted interest rate path would be a poor substitute for simply stating the Bank's intentions. Furthermore, the experience of central bankers who release interest rate forecasts suggests that future changes in forecasts will frustrate or confuse investors.

For the study go to http://www.cdhowe.org/pdf/Backgrounder_134.pdf

For further information:

Pierre Siklos,                                                                                               
Andrew Spence,
Philippe Bergevin,                                                                                                
Policy Analyst, C.D. Howe Institute                                                                                               
416-865-1904