Canada Renews Monetary Policy Framework, Maintains 2% Inflation Target Through 2031
The Government of Canada and the Bank of Canada have renewed their monetary policy framework for five years, keeping the 2% inflation target at the midpoint of a 1% to 3% control range through December 31, 2031.
The Government of Canada and the Bank of Canada have jointly renewed the central bank’s monetary policy framework for another five-year period, with the agreement running until December 31, 2031. The two institutions review and renew the framework every five years.
Under the renewed agreement, the inflation target remains at 2%, which serves as the midpoint of a 1% to 3% inflation-control range. Inflation continues to be measured by the 12-month rate of change in the consumer price index. Both parties stated that maintaining low, stable, and predictable inflation is the most effective way monetary policy can support economic well-being, investment, and job creation while protecting Canadians from large increases in the cost of living.
Monetary policy will continue to be conducted symmetrically, placing equal emphasis on deviations above and below the 2% target. This approach allows flexibility to respond to economic shocks while fostering confidence in Canada’s economy.
The renewal follows a period of elevated inflation driven by global supply chain disruptions and geopolitical conflicts, which eroded purchasing power. The Bank of Canada addressed these pressures forcefully to restore price stability. The central bank views this recent period not as a failure of the framework's design, but as an implementation challenge arising from extraordinary global shocks.
To better navigate such conditions, the Bank of Canada has strengthened its analytical capacity to assess how global and domestic supply-side shocks transmit to Canadian inflation.