The Bank of Canada and Swiss National Bank decisions

Canada: a consensus committee and a renewed mandate 

The Bank of Canada sets a target for the overnight rate at which financial institutions lend one another funds for one day, and operates a narrow corridor around it with a deposit rate below and a bank rate above. Decisions are taken by a Governing Council of senior Bank officials by consensus rather than by vote, and no vote tally is published. A summary of the deliberations is published a couple of weeks after each decision, a practice adopted comparatively recently in response to transparency criticism.

The mandate has an unusual feature. The inflation target is set jointly by the Bank and the federal government and is formally renewed every five years, which is a scheduled public negotiation about what the objective should be rather than a standing statutory instruction. Each renewal has been an occasion for published research and debate about the target's level, the width of any control range and whether other objectives belong alongside it.

Four of the eight decision dates each year are accompanied by the Monetary Policy Report, which carries the projections, and by a press conference. The Bank also publishes quarterly surveys of business and consumer expectations, which are read as a partial view of the same conditions the Council is assessing.

Canada also occupies an unusual position on the calendar because its economy is closely integrated with a much larger neighbour whose central bank meets on a different schedule. Canadian labour force data is published on the same morning as the United States employment report in most months, which places a domestic release and a far larger foreign one in the same instant, and Canadian inflation and retail data are frequently read against their United States counterparts rather than on their own. A Canadian statistic therefore rarely has a market session to itself.

Canada: an energy exporter next to the largest consumer 

The Canadian dollar is conventionally described as a commodity currency, and the description rests on a specific trade structure rather than on a general resource endowment. Canadian crude is landlocked, is heavier and more sulphurous than the light sweet benchmark, and reaches market largely through pipelines into the United States, so it trades at a differential to the reference grade that reflects transport capacity and refining configuration as much as the global oil price.

The relationship between the currency and crude has also been complicated by the fact that Canada's largest trading partner is simultaneously the largest consumer of its energy exports and a substantial energy producer itself. A change in the oil price therefore affects both economies at once, in partially offsetting directions, which is one reason the correlation between the pair and crude has varied widely across periods rather than holding as a rule.

Switzerland: quarterly, and decided by three people 

The Swiss National Bank conducts a monetary policy assessment four times a year, not eight or twelve, which makes it the least frequent scheduled decision among major central banks. Policy is decided by a Governing Board of three members. There is no larger committee, no external members and no published vote, and the small size of the body is a long-standing feature of the institution rather than a transitional arrangement.

The Bank is also constitutionally unusual in its ownership: it is a joint-stock company whose shares are listed and are held substantially by Swiss cantons and cantonal banks, with private shareholders holding the remainder on restricted terms. Its mandate is price stability while taking due account of economic developments, and it defines price stability itself.

The quarterly cadence has a practical consequence for anyone reading a calendar. Three months of developments accumulate between assessments, so the interval between Swiss decisions can contain several decisions from every other major central bank, and the assessment when it arrives is responding to a much longer accumulation of information than a six-week cycle would.

Switzerland: the exchange rate as an instrument 

Few central banks have been as explicit that the exchange rate is a policy variable. The Swiss franc's long-standing status as a currency into which capital moves during periods of stress produces persistent appreciation pressure, and appreciation transmits directly into imported price deflation in a small, extremely open economy. The Bank has therefore intervened in currency markets on a very large scale relative to the size of the economy, and its balance sheet as a share of national output has been among the largest of any advanced economy central bank.

The most instructive episode remains the minimum exchange rate the Bank announced against the euro and then abandoned without warning several years later. It is the standard case study in what a unilateral exchange rate floor is: a commitment held by intervention alone, credible for as long as the intervening authority is willing to keep buying, and removable at a moment of the authority's own choosing. Practitioners cite it as the clearest illustration that a stated policy commitment is not the same kind of object as a market price.

The Bank has also spent extended periods with a negative policy rate, and it reports interventions only afterwards, in aggregate, through its published accounts and sight deposit data. As with Japan, the fact of an operation is inferred from data before it is ever confirmed by statement.