National Bank of Canada (NBC) economists Warren Lovely, Stéfane Marion, and Matthieu Arseneau have called on the Bank of Canada (BoC) to incorporate an explicit unemployment rate forecast into its quarterly Monetary Policy Report [1]. The NBC team argues that the unemployment rate is central to understanding labour market slack and should complement existing Consumer Price Index (CPI) and Gross Domestic Product (GDP) projections [1]. They note that peer central banks, international institutions, and private-sector economists already provide such forecasts, making the BoC an outlier in this regard [1].
The NBC economists emphasize that including the unemployment rate would align with the BoC's established mandate and acknowledge the inter-relationship between inflation and unemployment, as outlined in standard economic theory [1]. They suggest that adding this single labour market indicator would enhance the completeness of the BoC's economic outlook and provide key stakeholders with much-needed guidance on the labour market [1].
Furthermore, the NBC team advocates for a shift in focus from the 'output gap' to labour market slack, arguing that this adjustment does not require a change to the BoC's explicit monetary policy mandate [1]. They believe that the sooner the BoC enhances its economic forecast with unemployment data, the better it will serve its stakeholders [1].
No immediate market reaction or analyst opinions on potential market impacts were discussed in the article [1].
CONCLUSION
NBC economists are urging the Bank of Canada to improve transparency and guidance by including unemployment rate forecasts in its quarterly reports. While the article highlights the potential benefits for stakeholders, it does not mention any direct market reaction or immediate policy changes.