The Bank of Canada and the federal government have issued a statement as part of the five-year review of their monetary policy framework, in which they reaffirm their commitment to controlling inflation, maintain the 2% target, and rule out incorporating a dual mandate that would include the goal of maximum employment.
"The Government and the Bank agree that monetary policy must promote the economic and financial well-being of Canadians. They also agree that the best way to achieve this is by keeping inflation low, stable, and predictable, thereby protecting Canadians from large increases in the cost of living", the joint note states.
Along these lines, the authorities emphasize that a monetary policy focused on price stability "contributes to economic growth, supports investment and job creation, and fosters confidence in the Canadian economy".
The document recalls that, over the past five years, disruptions to supply chains after the pandemic, sudden changes in demand, and geopolitical conflicts have driven inflation upward globally, highlighting the need for a "clear and credible" framework for setting inflation targets.
"The Bank of Canada has reflected on the period of high inflation and its policy response. This episode made it clear that high inflation imposes significant costs on households and businesses, eroding Canadians' purchasing power and their perception of the fairness of our economic system", they reaffirm.
At the same time, they note that they have strengthened their analytical tools to understand more precisely how supply shocks affect Canadian inflation and how monetary policy should respond when those disruptions are more intense and longer-lasting than usual.
Likewise, the Government and the Bank of Canada refer to transformations in international trade, the reshaping of supply chains, and changes in investment flows, in a context of commercial tensions and the application of tariffs with the United States, their main partner and neighbor.
"Price stability protects households' purchasing power and allows businesses to plan and invest with confidence. In addition, it promotes maximum sustainable employment and economic growth. It also fosters a stable financial environment", they have established.
The prior review of the framework, drawn up during the term of Justin Trudeau, stated that the central bank should "actively seek the maximum sustainable level of employment when conditions warrant it." In the current update, which will not be reviewed again until 2031, those references disappear, as do the mentions of climate change.