The Bank of Canada’s primary objective remains to maintain an inflation rate “low, stable and predictable” at 2%, according to its new five-year mandate unveiled this morning.
“The best contribution that monetary policy can make to the well-being of Canadians is to remain focused on price stability,” the Bank and the government said in a joint statement.
The announcement comes as inflation peaks in 18 years. At 4.7% in October, it is well above the central bank’s 1-3% target range.
Faced with criticism from the Conservative Party and concerns from the public, the bank and the government invite us to take a step back on the news.
“From a longer term perspective, since the adoption of an inflation targeting framework 30 years ago, inflation as measured by the Consumer Price Index (CPI) has hovered around 2% in average, despite episodes of upward and downward pressure, ”they explains.
Use
Although it varies very little from the previous one, the new mandate will lead the bank to pay particular attention to employment.
“A strong and inclusive labor market helps reduce income inequality and contributes to robust demand for goods and services,” the joint statement says.
Shifting economy
Although it remains confident that prices will stabilize in the coming months, the bank stresses that “the global financial crisis and the COVID-19 pandemic have had a significant impact on the global economy and financial system, and large trends like demographic change and new digital technologies are reshaping the economic landscape ”.
The bank will therefore have to contend with significant turbulence during this new five-year mandate.
“Climate change and the long-term transition to carbon neutrality will lead to structural changes in the Canadian economy and the global economy,” she adds.