The Bank of Canada and the Government of Canada have renewed their monetary policy framework for another five years, retaining the 2% inflation target at the midpoint of the 1% to 3% control range. The agreement runs through Dec. 31, 2031, with price stability remaining monetary policy’s primary focus. Inflation will continue to be measured as the change in the consumer price index over 12 months. Policy will remain symmetric, placing equal emphasis on deviations above and below the target. The framework preserves flexibility to respond to economic shocks and support economic growth and labour market outcomes while maintaining a clear focus on returning inflation to target over time. Following its assessment of the recent period of elevated inflation, the Bank has strengthened its analytical capacity to assess how global and domestic supply shocks affect Canadian inflation and how policy should respond when those shocks are unusually large or persistent. It views the episode as a challenge to implementing policy amid extraordinary global shocks rather than a failure of the framework’s design.
Bank of Canada and Canadian government renew 2% inflation target through 2031
The Bank of Canada and the Canadian government extended their monetary policy framework to Dec. 31, 2031, keeping the 2% inflation target within a 1% to 3% control range. Policy will continue to treat deviations above and below target equally, with flexibility to respond to economic shocks while returning inflation to target over time. Following a review of the recent inflation episode, the Bank has also strengthened its analysis of how supply shocks affect inflation and the appropriate policy response.