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These past few months have been busy for central bankers, to say the least, and the past few days are certainly no exception. While developments on Wall Street have garnered much attention, the cost of living has also been an issue for us all, whether we're buying gas at the pumps, booking an airline ticket, or just picking up a loaf of bread at the grocery store.

The federal government and the Bank of Canada have been committed for some time to achieving and maintaining price stability as a way to foster a rising standard of living for all Canadians. To support this objective, the inflation-control target range of 1 to 3 per cent was recently extended through to the end of 2001. By then, the government and the Bank plan to announce a long-run target for monetary policy. In this article, the authors provide an overview of the most recent empirical evidence on the benefits of lower inflation. They draw on an extensive earlier survey and on work presented at two recent conferences on price stability hosted by the Bank of Canada. They find that, when inflation and tax interactions are taken into account, there are large benefits to lowering inflation. When these benefits are compared with the transitional costs associated with lowering inflation, significant positive benefits remain. However, the authors note that the extension of the inflation-control targets to the end of 2001 allows further research to ensure an operational definition of price stability that will help Canadians achieve a high standard of living.

Selected definitions, graphs and historical data

The rise in inflation in 2021–22 sparked a growing literature and debate over the causes of the surge as well as the near- and medium-term path for inflation. This review offers three key messages.

In his first speech, Governor Tiff Macklem explains how the Bank’s commitment to low, stable and predictable inflation has guided our actions during COVID-19.

Governor Tiff Macklem talks about the Bank of Canada’s decision yesterday to raise its policy interest rate. He explains that after two years of extraordinary stimulus, we are now on a path of rising interest rates.

From 2011 to 2019, inflation in Canada and advanced economies usually registered below inflation targets, spurring the debate on whether the inflation process has changed. This paper highlights emerging questions that will influence the conduct of monetary policy in Canada in the near term.

These are challenging times, indeed. We are facing a financial crisis without comparison for generations. Most financial markets have experienced historic declines in prices and unprecedented spikes in volatility.

This note investigates whether the recent weakness in inflation in Canada can be related to global factors not included in the current staff analytical framework (domestic slack, movements in commodity prices and in the exchange rate). A global common factor for inflation among selected advanced economies appears to contain marginal information for Canadian inflation beyond what is found in movements in commodity prices and the exchange rate.

Deputy Governor Agathe Côté discusses the importance of inflation expectations for monetary policy and a new survey the Bank of Canada created to monitor household expectations.