Ottawa should consider expanding the Bank of Canada’s mandate to explicitly target employment alongside inflation, while also taking steps to boost the transparency of its rate-setting decisions. That recommendation came Tuesday from the Senate Banking Committee.
The Standing Senate Committee on Banking, Commerce and the Economy released its interim report on the monetary policy framework, calling on Parliament to review the central bank’s mandate and legislation before the government and the Bank of Canada renew their arrangements in 2026.
“The Bank of Canada continues to be tested by the complex and uncertain global economy, and the committee wants to ensure that the bank’s monetary policy supports the Canadian economy and offers transparency,” the committee said in a release, adding that its final report will contain specific recommendations.
In its interim report, the committee examined whether the bank’s legislation needs to be modernized to improve its accountability and transparency, particularly when it comes to rate-setting decisions. It also looked at whether the bank’s core inflation metrics are the best measures of underlying inflation, and it considered whether the bank’s mandate should be expanded to target employment levels alongside inflation.
However, the committee stopped short of making recommendations in these areas.
“The complexity of this topic is such that the committee believes, before offering specific prescriptions or recommendations, it needs to conduct a more in-depth analysis and hear from more experts in the field of macroeconomics, in particular representatives from other central banks,” it said.
In the meantime, the committee noted that in the testimony it has heard to date, witnesses consistently called for more transparency and accountability from the bank — and it was told that measures should be considered in this area, including requiring regular external reviews, legally mandating reporting to Parliament and changing how deputy governors are selected.
It also reported that there’s broad support for an expanded mandate for monetary policy that targets employment as well as inflation. It heard that, amid heightened economic uncertainty, “monetary policy will need to be more responsive and coordinated with other economic and fiscal measures and actors.”
“Geopolitical concerns, pandemics and the energy transition, among other uncertainties, are all testing the global economy and how the Bank of Canada tackles inflation. Is the 90-year-old legislation that shaped the bank still relevant and effective in the current context? This is a critical question worth answering urgently,” said Senator Tony Loffreda, deputy chair of the committee, in a release.
“The upcoming renewal of the agreement on Canada’s monetary policy framework marks a pivotal moment for the central bank. Our committee is taking a serious look at how the bank achieves its mandate and how it can improve its transparency and accountability,” added Senator Pamela Wallin, chair of the committee.