BoC de­fends si­lence be­fore rate hike

Truro Daily News - - CANADA -

The Bank of Canada is de­fend­ing it­self amid ques­tions about its public si­lence ahead of an in­ter­est-rate hike last week that caught many analysts by sur­prise.

BMO chief econ­o­mist Doug Porter is tak­ing is­sue with the lack of public re­marks by the cen­tral bank in the eight weeks be­fore a rate in­crease that he says caused a fairly vi­o­lent mar­ket re­ac­tion.

In a note Fri­day to clients, Porter wrote that while he thought the case for a rate in­crease was strong, he felt the Bank of Canada’s silent sum­mer cre­ated a great deal of uncertaint­y for mar­kets ahead of the de­ci­sion.

Porter ar­gues that the rate hike caught many analysts off guard – and he points to one sur­vey that found only six of 33 fore­cast­ers had an­tic­i­pated the in­crease.

But a Bank of Canada spokesman says mar­ket data be­fore the hike showed roughly 50-50 odds of an in­crease – re­veal­ing that a much greater per­cent­age of traders were cor­rectly in­ter­pret­ing the bank’s most-re­cent mes­sag­ing from early July.

In re­sponse to Porter’s crit­i­cisms, Jeremy Har­ri­son also says key fig­ures show­ing sur­pris­ingly strong sec­ond-quar­ter growth were re­leased less than a week

be­fore the rate an­nounce­ment – dur­ing the bank’s pre-de­ci­sion black­out pe­riod.

He says the com­mu­ni­ca­tions ap­proach was not un­usual be­cause

in three of the last four years the bank didn’t make any public re­marks be­tween the sched­uled rate an­nounce­ments in July and Septem­ber.

CP PHOTO

The Bank of Canada is de­fend­ing it­self amid ques­tions about its public si­lence ahead of an in­ter­est-rate hike last week that caught many analysts by sur­prise.

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