The Bank of Canada should consider better communication of its monetary policy intentions, building on the steps it has already taken to improve the transparency of messages it sends to the market, the International Monetary Fund said on Tuesday.

The IMF has often suggested improvements to central bank policy communications, especially for banks in emerging markets. Last year it had stressed that the U.S. Federal Reserve should offer clear communication on assessment of incoming data.

Earlier this year, it also urged the Bank of Japan to tread cautiously in raising interest rates.

In a statement, the IMF said strengthening communications could include explanations on how quickly the BoC thinks the policy rate could return to neutral – a rate of interest when inflation is stable and employment is generally considered to be full.

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The BoC can also better communicate on how it views market expectations regarding the evolution of the policy rate, the lender said.

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In response, the BoC said in a statement that “while the Bank may not agree on every suggestion made by IMF staff, we certainly share the goal of transparency, and a commitment to look at ways for possible improvements.” It did not elaborate.

From early last year, the Bank of Canada took a historic step towards transparency by agreeing to release minutes from its policy-setting meeting in efforts to restore credibility lost during its fight to contain inflation.

During the COVID pandemic, the bank was widely criticized for maintaining inflation was temporary and refraining from rate hikes even as consumer prices jumped.

The BoC became the first central bank amongst the G7 countries last week when it trimmed its key overnight rate by 25 basis points to 4.75% as inflation has consistently stayed below 3% since the start of the year.

The IMF said steps to strengthen communication “could help markets better understand how the BoC reacts to new data.”