Canada opts to retain 2% inflation target

Governor Stephen Poloz and senior deputy governor Carolyn Wilkins. Photo: Bank of Canada

Canada has opted to retain its 2% inflation target, while adding new measures of core inflation and using a "risk management" approach to allow monetary policy the flexibility to take account of financial stability.

In a new five-year deal with the government, struck on October 24, the Bank of Canada chose to continue to target 2% inflation with a 1–3% tolerance band. The central bank's research found that while a higher inflation target could reduce the occurrence of zero lower bound episodes,