External Deputy Governor Nicolas Vincent gives a behind-the-scenes look at how the Bank of Canada’s Governing Council arrives at its monetary policy decisions.
Watch External Deputy Governor Vincent speak to the Sherbrooke Chamber of Commerce and Industry. Read the full speech.
Gathering information and advice
Eight times a year, Governing Council decides whether to raise, maintain or lower the policy interest rate—the Bank’s main tool for keeping inflation low, stable and predictable.
These decisions affect households and businesses in many ways, and they are taken with the utmost care.
Starting about a month before each decision is announced, Governing Council goes through a rigorous process of gathering and analyzing information and advice.
Economic data are important, but they have limits. They’re based on the past and don’t reflect the variety of experiences lived by Canadians. So, along with hard data, Governing Council also considers:
- information from the Bank’s surveys of consumers and businesses
- information from meetings with businesses and community groups across Canada
A week before making the decision, Governing Council meets with advisors to debate different courses of action. Everyone gives a recommendation and explains their thinking—and then it’s up to Governing Council to decide.
Weighing the evidence and deciding
The Bank makes decisions independently. This protects its work from short-term political objectives and other outside pressures. This is especially important when the decisions are difficult—as they have been in recent years during the fight to bring inflation back down to the Bank’s 2% target.
When it’s time to make the decision, Governing Council members meet privately in a secure room. The Governor chairs the discussion, and each member presents their views on growth and inflation in Canada and abroad. After discussion on the outlook, everyone gives their opinion on monetary policy, and the group debates the decision.
Each member of Governing Council has distinct expertise from their own career path and education, so differences in opinion are common. But the Bank makes monetary policy decisions by consensus. That means Governing Council will unanimously agree on what to do even if members start with different views. The need to find consensus makes for stronger and more informed decision-making.
At times, points raised by other members may lead us to fine-tune or rethink the way we’ve interpreted the data. Or a colleague may raise a point or highlight issues that others had not originally considered.”
Explaining the decision to Canadians
Explaining the decision to the public—in both official languages—is almost as important as making it.
Governing Council works with the Bank’s communications team to develop the press release and other products to explain the reasons behind the decision. The Governor and Senior Deputy Governor hold a press conference and regularly give media interviews, and other members host information sessions for stakeholders.
Since January 2023, the Bank has published a summary of deliberations two weeks after every decision. This summary is a record of Governing Council’s views on the economy and risks to the inflation outlook and what members considered in making their decision.
To maintain the public’s trust, we must be rigorous, professional, humble, honest and transparent.”
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