Bank of Canada (BoC) Interest Rate Decision

Bank of Canada announces its decisions on interest rate eight times a year. It is one of the key events influencing the Canadian dollar quotes. The interest rate decision is adopted by the BoC Governing Council. The Governing Council makes the decision using information provided by the Monetary Policy Review Committee and the four economic departments at the Bank (they are responsible for analyzing Canada's economic situation, the international economy, financial stability and financial markets). Also the Council uses data series from Statistics Canada.

The decision-making process consists of five stages.

• Presentation of the staff projection — a base-case or most likely scenario, a number of key risks and alternative scenarios (two weeks before the interest rate decision).
• The Major Briefing occurs one week after the presentation of the staff projection. The briefing discussions include monetary and economic developments, business outlook and current inflationary process issues. Members of all BoC committees and departments take part in the Major Briefing.
• Final Policy Recommendations (two days after the Major Briefing). The recommendations are presented by a senior member of the Canadian Economic Analysis Department or International Economic Analysis Department.
• The Deliberation and Discussion stage begins on the same day as the presentation of final policy recommendations. Only members of the BoC's Governing Council participate in the discussion. This stage lasts two days.
• Publication and Communication (publication of the press release on the Bank of Canada's interest rate).

Depending on inflationary conditions, the BoC may either raise the interest rate (if inflation is too high), cut it (in case of deflation), or leave it unchanged (if inflation remains at the target level). The interest rate is the main instrument for regulating inflation, which is implemented by the Bank of Canada.

Changes in the interest lead to a short-term volatility of the Canadian dollar. An increase in the interest rate is seen as positive for the national currency.