The Bank of Canada aims to keep inflation at the 2 per cent midpoint of an inflation-control target range of 1 to 3 per cent. The inflation target is expressed as the year-over-year increase in the total consumer price index (CPI)—the most relevant measure of the cost of living for most Canadians.
The Bank also monitors a set of “core” inflation measures, including the CPIX, which strips out eight of the most volatile CPI components. These “core” measures allow the Bank to “look through” temporary changes in total CPI inflation and to focus on the underlying trend of inflation, which is a good indicator of where total CPI inflation is headed in the absence of policy action. In this sense, core inflation is monitored as an operational guide to help the Bank achieve the total CPI inflation target, not as a replacement for it.
- Monetary Policy
- Inflation-Control Target
- Why has Canada's inflation target been set at 2 per cent?
- Benefits of Low Inflation
- Inflation and Price Stability
- Consumer Price Index
An animated presentation on the benefits of low and stable inflation (requires Adobe Flash.)
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.