Inflation-control targeting has been the cornerstone of monetary policy in Canada since its introduction in 1991. At present the target range is 1 to 3 per cent, with the Bank's monetary policy aimed at keeping inflation at the 2 per cent target midpoint.

The inflation-control target has helped to make the Bank's monetary policy actions more readily understandable to financial markets and the public. The target also provides a clear measure of the effectiveness of monetary policy. One of the most important benefits of a clear inflation target is its role in anchoring expectations of future inflation. This, in turn, leads to the kind of economic decision making - by individuals, businesses, and governments - that brings about non-inflationary growth in the economy.

Reference Material

Backgrounders:

On target: why the Bank of Canada targets low and stable inflation

An animated presentation on the benefits of low and stable inflation (requires Adobe Flash.)

Agreement on the Inflation-Control Target

The inflation-control target has been extended five times since 1991 - in 1993 (for the period 1995-98), 1998, 2001, 2006, and 2011 to the end of 2016.