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Inflation-control target

Definitions

Inflation-control target

The inflation-control target was adopted by the Bank and the Government of Canada in 1991 and has been renewed several times since then, most recently in December 2021 for the five years to the end of 2026. The target aims to keep total CPI inflation at the 2 per cent midpoint of a target range of 1 to 3 per cent over the medium term. The Bank raises or lowers its policy interest rate, as appropriate, in order to achieve the target typically within a horizon of six to eight quarters—the time that it usually takes for policy actions to work their way through the economy and have their full effect on inflation.

Inflation

A persistent rise over time in the average price of goods and services - in the "cost of living."

Consumer price index (total CPI)

The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.

The CPI is widely used as an indicator of the change in the general level of consumer prices or the rate of inflation. Since the purchasing power of money is affected by changes in prices, the CPI is useful to virtually all Canadians.