The Bank of Canada’s exceptional policy actions during the COVID-19 pandemic provided important support for the economy during the unprecedented shock, says a review published today. The review highlights lessons that will shape the Bank’s response in the event of future crises.
“The Bank of Canada is a learning institution, and we must take on board the lessons from this unprecedented experience,” Bank of Canada Governor Tiff Macklem said. “This review is important for our accountability and will help us be better prepared and more effective should Canada ever face another economic crisis like this one.”
To support its accountability and transparency, the Bank commissioned an independent assessment of the review by three outside experts: former Bank of Spain Governor Pablo Hernández de Cos, Professor Kristin Forbes of MIT’s Sloan School of Management and University of Calgary Professor Trevor Tombe. The Bank published the independent evaluation alongside its own review today.
“The review gives a detailed, balanced and credible summary of the Bank’s actions and shows a willingness by the Bank to critically evaluate its own policies and improve policy in the future,” Hernández de Cos said.
In response to the review and independent assessment, the Bank’s Governing Council said that in the event large-scale asset purchases are needed in the future, the Bank would communicate clearly about the purpose of any purchase program and ensure that it is designed with a clear exit strategy.
Governing Council also agreed that if the Bank uses extraordinary forward guidance regarding the path for interest rates in the future, it should continually and clearly communicate the conditions under which the guidance would be ended.
Finally, Governing Council agreed that the bar for using these exceptional monetary policy tools should remain very high.