Renewing Canada’s monetary policy framework

The Bank of Canada and the Government of Canada review and renew the agreement on Canada’s monetary policy framework every five years. This regular exercise provides an opportunity to assess how well the framework is working and determine what parts of it should be preserved and what could be improved.

The most recent review concluded with the renewal of the framework for another five years—from January 2027 to December 2031. The renewed agreement maintains the cornerstone of the monetary policy framework: a 2% inflation target at the midpoint of a 1% to 3% inflation-control range.

Our approach

The Bank undertook a comprehensive, multi-year review leading up to the renewal of the framework. As part of that review, our researchers examined three key economic issues:

Monetary policy in a more shock-prone world: Ongoing structural changes to the economy and the likelihood of more frequent supply shocks in the future can lead to upward pressure on inflation and difficult trade-offs for monetary policy. Does Canada need a richer playbook for monetary policy to keep inflation on target?
Assessing underlying inflation: No single measure of core inflation works well in all circumstances. How should we measure underlying inflation in a more volatile, shock-prone world? What measures of core inflation are most robust to structural change? Does persistently high inflation in shelter prices distort measures of underlying inflation?
Housing and inflation: Housing costs feed into inflation. But monetary policy cannot directly increase the supply of housing. How does monetary policy affect housing demand and supply, and how does the imbalance between them affect inflation in shelter prices?

The research findings will be published in a forthcoming report.

The renewal process also gave the Bank a chance to hear directly from Canadians. We consulted stakeholders and people across the country about their experiences, questions and perspectives on inflation and monetary policy. A report summarizing what we heard was published in June 2026.

Speeches

December 16, 2025

Good money and your central bank

Remarks Tiff Macklem The Chamber of Commerce of Metropolitan Montreal Montréal, Quebec

Governor Tiff Macklem discusses the Bank of Canada’s role in ensuring the stability of money in all its forms, from currency to digital payments. He also outlines how keeping inflation low and stable ensures Canadian money retains its purchasing power.

Content Type(s): Press, Speeches and appearances, Remarks Subject(s): Currency, Bank notes, Digital currency, Monetary policy, Inflation targeting framework

October 2, 2025

Underlying inflation: Separating the signal from the noise

Remarks Rhys R. Mendes Ivey Business School London, Ontario

Deputy Governor Rhys Mendes speaks about how the Bank of Canada assesses underlying inflation, including the use of measures of core inflation. He also touches on the renewal of the monetary policy framework, which happens in 2026.

Content Type(s): Press, Speeches and appearances, Remarks Subject(s): Monetary policy, Economic models, Inflation, Inflation targeting framework

August 26, 2025

Flexible inflation targeting in a shock-prone world

Remarks Tiff Macklem Bank of Mexico 100ᵗʰ Anniversary Seminar Mexico City, Mexico

Governor Tiff Macklem discusses how inflation targeting became a leading strategy for maintaining price stability and how the Bank of Canada is ensuring its monetary policy framework is fit for future challenges.

Content Type(s): Press, Speeches and appearances, Remarks Subject(s): Monetary policy, Economic models, Economy/Economic growth, Inflation, Inflation targeting framework

Research

Monetary Policy in a Volatile World: ToTEM Simulations

Staff analytical paper 2026-27 Edward Booth, Edouard Djeutem, Oleksiy Kryvtsov, Fanny McKellips, Yang Zhang

Using simulations of the Bank of Canada’s projection model, we assess inflation risks from greater supply-shock volatility and show that monetary policy faces sharper trade-offs, as stabilizing inflation increasingly comes at the cost of weaker real activity.

Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E3, E31, E32, E5, E52, E58 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission

Deglobalization and Trade Fragmentation: Implications for the Inflation-Output Trade-Off

Staff analytical paper 2026-24 Matteo Cacciatore, Daniela Hauser, Yuko Imura

How do deglobalization and rising trade costs affect monetary policy? A two-country, multi-sector model of Canada and the United States shows that bilateral trade-cost shocks generate a manageable inflation–output trade-off under the existing framework — but larger or more persistent shocks would make look-through policies costlier and riskier.

Content Type(s): Staff research, Staff analytical paper JEL Code(s): D, D5, D57, E, E5, E52, E58, F, F1, F13, F4, F41, F6, F62 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation, Structural challenges, International trade, finance and competitiveness

Recent Evidence on the Resiliency of Flexible Inflation Targeting

Staff analytical paper 2026-23 Edoardo Briganti, Wei Dong, Olena Kostyshyna, Soyoung Lee, Florent Samson, Rodrigo Sekkel

This paper assesses the resilience of flexible inflation targeting in the presence of large and persistent supply shocks.

Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E5, E52 Research Theme(s): Monetary policy, Monetary policy framework and transmission

Corporate governance

Labour negotiation updates

Reconciliation Action Plan

Bank of Canada Museum

What is a central bank?

Work at the Bank

Corporate governance

Labour negotiation updates

Reconciliation Action Plan

Bank of Canada Museum

What is a central bank?

Work at the Bank

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