The Government of Canada and the Bank of Canada today confirmed the renewal of the country’s monetary‐policy framework for another five‐year period, extending the agreement to December 31, 2031. The renewal re‐affirms the long‐standing 2% inflation target, which sits at the midpoint of the 1% to 3% inflation‐control range and is measured as the 12‐month rate of change in the consumer price index.
Over the past five years, Canada experienced repeated global and domestic shocks – post‐pandemic supply‐chain disruptions, rapid demand shifts and geopolitical conflicts – that pushed inflation above target. The Bank acted forcefully, and inflation has now returned to the 2% target and remains within the 1%‐to‐3% control range.
In reflecting on that period of elevated inflation, the Bank highlighted the high costs to households and businesses and used the experience to strengthen its analytical capacity. It will now better assess how large, persistent supply‐side shocks transmit to Canadian inflation and how policy should respond.
Monetary policy will continue to be conducted symmetrically, giving equal weight to deviations above and below the target, while retaining flexibility to respond to economic shocks. The primary focus remains on keeping inflation low, stable and predictable, which the authorities say supports maximum sustainable employment and economic growth.
The joint statement underscores that a credible, well‐understood inflation‐targeting framework is viewed as essential for confidence in Canada’s economy, investment decisions and financial stability. By renewing the framework, the government and the Bank signal a continued commitment to price stability amid ongoing global uncertainty.