Liberals expected to detail new Bank of Canada marching orders on inflation targeting

OTTAWA — The federal government is scheduled today to unveil the Bank of Canada’s marching orders that will guide its inflation-targeting regime for the next five years.

Finance Minister Chrystia Freeland and Bank of Canada governor Tiff Macklem are scheduled to hold a joint press conference later this morning in Ottawa.

Since 1991, the central bank has been mandated by successive governments to keep inflation between one and three per cent.

In practice, that usually means the bank has tried to keep the pace of price increases at two per cent by raising rates to cool demand when inflation runs too hot and reducing rates when inflation lags.

But the pandemic has thrown a wrench into the inflation-targeting framework, causing the consumer price index to run near zero early on in the pandemic and more recently running at an 18-year high.

Economists expect the government to ask the central bank to continue targeting inflation at two-per-cent, but include some wording to let the Bank of Canada take into account changes in the labour market before making any rate decisions.

This report by The Canadian Press was first published Dec. 13, 2021.

The Canadian Press