Monetary Policy Report - May 1998

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Canada’s inflation-control targets establish a specific medium-term objective for monetary policy. In February 1998, the target of holding consumer price inflation inside a range of 1 to 3 per cent was extended jointly by the Government of Canada and the Bank of Canada to the end of 2001. The Bank also indicated that there would be no change in the way in which policy was conducted under the targets (see the appendix, page 33). Because of the lags between the Bank’s policy actions and their ultimate effect on inflation, policy decisions have to be forward- looking. Consequently, these decisions are necessarily based on projections of an uncertain future and must respond to unexpected events, both economic and financial.