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Canada

Bank of Canada and Ottawa renew 2% inflation target framework for five years

The renewed framework keeps price stability as the central bank's core goal, shaping interest rate decisions that affect borrowing costs for businesses and households.

Photo: Alex Ohan, Pexels

What happened

The Government of Canada and the Bank of Canada agreed to renew the central bank's monetary policy framework for another five years. Bank of Canada+1 The joint statement says monetary policy should keep inflation low, stable and predictable to protect Canadians from large increases in the cost of living. Bank of Canada The 12-month change in the consumer price index will serve as the guide for policymakers, with an emphasis on keeping headline inflation at 2%. Morningstar Unlike the 2021 renewal, the joint statement does not refer to securing maximum employment. Morningstar

Around it

The joint statement says the past five years brought repeated economic shocks, including post-pandemic supply chain disruptions, rapid shifts in demand and geopolitical conflict. Bank of Canada The statement says a credible framework focused on price stability helps the economy grow, supports investment and job creation, and fosters confidence. Bank of Canada The Bank of Canada was among the first central banks to adopt an inflation-targeting regime in the early 1990s. Morningstar

What comes next

Bank of Canada Governor Tiff Macklem is scheduled to deliver a speech on Nov. 24 in Toronto with further details on the framework. Morningstar

Sources

  1. Bank of CanadaJoint Statement of the Government of Canada and the Bank of Canada on the Renewal of the Monetary Policy Framework
  2. MorningstarBank of Canada to Maintain 2% Inflation Target in Renewed Framework

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