'We're not getting it perfect': Carolyn Rogers says the Bank of Canada is learning from its mistakes

Carolyn Rogers, the Bank of Canada's new senior deputy governor, was not thinking about the Conservative leadership candidate who set up outside the central bank's doors late last month when she gave a speech about trust.

Rogers said in an interview that she could write a speech in four days. It just happened to be on time.

The Bank of Canada's leaders don't like how they've been dragged into a partisan political contest. They didn't need Pierre Poilievre's emergence as Canada's answer to Ron Paul to know that a segment of the population has lost faith in them.

Rogers told an audience in Toronto assembled by Women in Capital Markets that some people are questioning their trust because of the extraordinary actions they have taken. They are an opportunity to engage with Canadians about what we do, how we do it and how we can improve.

Paul mounted a competitive grassroots campaign for the Republican presidential nomination in 2012 on the back of a libertarian critique of the Federal Reserve. If Poilievre's promise to audit the Bank of Canada sounded familiar, it was because Paul has been trying to audit the Fed since 2009. The Federal Reserve transparency act of 2021, which was referred to the Senate banking committee last year, is one of many bills introduced by his son, Republican senator from Kentucky, and is intended to increase oversight of the Fed.

Canada was spared much of the political upset that followed the Great Recession in the United States, but the Bank of Canada's leaders knew they could be next. The central bank launched The Economy, Plain and Simple in order to provide a dialogue over economic policy with a baseline of neutral articles and videos.

The governor pledged in the summer of 2020 to do a better job communicating with the general public, acknowledging that central banks had become too focused on making sure traders and economists understood what they were doing, at the expense of securing the trust of the broader population. The Bank of Canada received a new policy mandate from the federal government at the end of last year and was informed by years of research and consultations.

‘They’re voicing their concern’

The Bank of Canada, like most central banks, was a black box, but that is no longer the case. The public mood changed with the Great Recession and central bankers had to take their credibility more seriously. Rogers, a former financial regulator, said she decided to make her first speech as senior deputy governor about trust a couple of months ago, spotting an opportunity to discuss an issue she has been thinking about for years.

Rogers said in the interview that people are questioning public institutions. Why? I don't know. There are a lot of different voices out there now that there are more sources of information. We can control the narrative, but we can't say that this is the only source of truth.

Inequality gets raised a lot. It is something that central banks are looking at. I think there are some people who don't think the economy is working well for everyone. They are expressing their concern.

Policymakers around the world learned from the Great Recession that governments and central banks should not have withdrawn theStimulus too soon. The runaway inflation they were worried about was never arrived. They got a painfully slow recovery that came with elevated levels of long-term unemployment, widening income disparity, and the spread of opioid addiction from the southern United States to parts of Canada. When confronted with an epic recession in the late winter of 2020, policymakers decided to focus on growth instead of prudence.

Rogers was in the job when the initial decisions were made. I was in the virtual room when the central banks from around the world were looking at the same thing. There is decades and decades of experience and wisdom in that room. I think they were all in shock. The idea that the entire global economy could be switched off overnight was not something that was in anyone's mind. The degree of responsibility they felt was overwhelming, and this is a bunch of people that are generally pretty cautious and will usually debate something before they make a move.

‘We’re not getting it perfect’

It appears that central banks overdid it. In the aftermath of the Great Recession, monetary policy and fiscal policy were often working at cross purposes, whereas central banks and governments unleashed extraordinary levels ofStimulus in unison

I don’t think we ever intended to present an image that we had it all figured out, (that) we had a flawless track record

Carolyn Rogers

The US consumer price index increased in April by the largest amount in decades. Canada is experiencing a similar burst of inflation. Central banks initially dismissed the price pressure as the result of supply disruptions related to the Pandemic, but probably one that distracted them from what was going on with demand. Macklem acknowledged during testimony at the House finance committee last month that the central bank had made a mistake with inflation, and Rogers said in her speech in Toronto that there were some things we got wrong.

Rogers said in the interview that they never intended to present an image of a flawless track record.

Macklem, Rogers, and some of their international peers decided to admit they made a mistake. In her book Being Wrong, writer Katherine Schulz documented that humans are biologically resistant to concede error and generally terrible at correction even when the facts change. The Great Recession was needed by Alan Greenspan to convince him that the fear of bankruptcy was not good for bankers.

Greenspan's heirs seem to be less trapped by their ideologies. If they learn from their mistakes, they will be more trustworthy. Rogers claims that they have at the Bank of Canada.

Rogers said in the interview that the team of smart economists had models that were not designed for some of the strange things happening in the economy. It's difficult when you have a present set of circumstances that look nothing like what you've seen before. Are we adjusting in the mechanical or technical way as well as in our messaging?

Email: kcarmichael@postmedia.com