Source: Bank of Canada
We are starting our framework renewal
Since 1995, the Bank’s framework for monetary policy has been to target 2% inflation, the midpoint of a range between 1% and 3%. The post-pandemic inflation shock tested this framework like never before. But monetary policy worked, and inflation returned to 2%.
Canada’s economy is now facing a future rife with more frequent shocks and more structural change. That’s why we’ll be asking a few key questions as we begin the review of our framework—a process that happens every five years:
- With more supply shocks ahead, do we need a richer playbook for how we achieve the inflation target?
- How do we best measure underlying inflation in a more volatile world?
- How do monetary policy and housing interact?
The monetary policy framework has worked well for decades, so the bar for change is high. But the world economy is shifting, and the Bank must be as ready as possible for what lies ahead.