The Government of Canada and the Bank of Canada have renewed the central bank's inflation-targeting framework for another five years, affirming the 2 percent target remains the policy objective.
The two bodies said the experience of the past five years, marked by high inflation, reinforced the value of a clear and credible inflation-targeting framework.
"The experience of the past five years has reaffirmed the strength of the inflation-targeting framework and the importance of a clear and unwavering commitment to price stability," the Bank of Canada and the Department of Finance said in a joint statement.
The framework is reviewed and renewed every five years, after which the Bank of Canada independently conducts monetary policy to achieve its goals.
The government and the central bank said they agree that monetary policy must work to promote the economic and financial well-being of Canadians.
"We also agree that the best way monetary policy can do this is by keeping inflation low, stable, and predictable, thereby protecting Canadians from large increases in the cost of living," the statement said.
The Bank of Canada said the period of raised inflation underscored that high inflation imposes significant costs on households and businesses, eroding purchasing power and a sense of fairness in the economic system.
It said it has strengthened its analytical capacity to better assess how global and domestic supply-side shocks affect Canadian inflation, and how policy should respond when such shocks are larger and more persistent than normal.
The central bank views the recent inflationary episode not as a failure of the framework's design, but as a challenge to its implementation amid extraordinary global shocks.
"Over the past five years, the global and Canadian economies have been hit by repeated shocks," the statement said.
"Post-pandemic disruptions in supply chains, rapid shifts in demand, and geopolitical conflicts have pushed up inflation around the world, including in Canada."
The Bank of Canada said it acted forcefully to restore price stability, and while the adjustment was difficult, the policy response worked, returning inflation to the 2 percent target and its 1 percent to 3 percent control range.
The renewal comes as Canada's economy faces profound change and heightened geopolitical uncertainty, with international trade patterns being redrawn, supply chains reconfigured and global investment flows shifting.
Demographic shifts and the widespread adoption of artificial intelligence will also continue to alter the economy in the years to come, the statement noted.
"Against this backdrop, the Government of Canada and the Bank of Canada still agree that the best contribution monetary policy can make to the well-being of Canadians is to maintain low, stable, and predictable inflation," the statement said.
Price stability protects household purchasing power, allows businesses to plan and invest with confidence, supports maximum sustainable employment and economic growth, and fosters a stable financial environment, it added.
The government and the bank said the 2 percent target has served Canadians well for more than three decades and is a clear and credible anchor for monetary policy decisions.
"Monetary policy will maintain a primary focus on keeping inflation low and well anchored, while allowing for flexibility in its implementation to support economic growth and strong and stable labour market outcomes," the statement said.
e2gold.ca reported earlier this month that Bank of Canada Governor Tiff Macklem said federal spending is not at odds with the central bank's inflation fight.
By renewing the framework, the government and the bank reaffirmed their shared dedication to safeguarding the value of Canadians' money and promoting a stable and resilient economic future.
This story was written by the e2gold.ca newsroom from reporting by Department of Finance Canada and Bank of Canada. Quotes are checked word for word against that reporting.