Private talk by BoC didn’t introduce new outlook, source says

The place for Bank of Canada watchers to be on Monday was the Albany Club in Toronto, where a business association hosted a private lunch event with deputy governor Larry Schembri.

The event, which was off the record and closed to the media, comes at a particularly sensitive time for interest rates. Two weeks ago, the central bank began to set the stage for increases, leading some investors to place bets on a move at the July 12 meeting. Schembri’s presentation to the Toronto Association for Business and Economics is one of the last appearances by a top central bank official before that date.

The Bank of Canada has itself said private events like Schembri’s can lead to problems. An internal review showed the bank is revising its guidelines for private speaking engagements because such events may give the impression that some select groups receive privileged access to information, eroding public trust. It also highlighted the risk some information could be shared inappropriately on social media.

At a time investors are rethinking rate forecasts, “every communication by the central bank becomes exponentially more important,” Derek Holt, head of capital markets economics at Bank of Nova Scotia in Toronto, said by phone before the speech.

Two people who attended and wished to remain anonymous because of the privacy rules said after the event Schembri didn’t introduce any new economic outlook. One of the people said the speech touched on issues made public in the bank’s April economic forecast paper. The other person said the presentation was a look at some “puzzles” in the outlook that had already been raised in public. Neither person identified specific topics. Schembri declined to comment.

The chances of a rate increase at the July 12 meeting rose to above 50 per cent last week, from about five per cent on June 9, the last trading day before senior deputy governor Carolyn Wilkins, then governor Stephen Poloz, signalled the prospect of higher rates as an economic recovery gathers speed. Chances slipped to 37 per cent on Friday after Statistics Canada data showed the pace of inflation fell even further below the central bank’s two per cent target, and dropped to 33 per cent on Monday.

The central bank’s internal review done in December found the number of private speaking engagements by governing council members outnumbered public ones by almost two to one over a three-year span. The bank, which says private engagements are valuable partly because they allow for candid discussions, maintains a policy of not disclosing anything privately that hasn’t already been released to the public.

“Indeed, at this event, we are very much there to learn from others, not to deliver a new message,” Josianne Menard, a Bank of Canada spokeswoman, said Friday in an email.