A renewed agreement, with the same target
Canada's government and the Bank of Canada announced the renewal of their monetary policy framework on November 5. The agreement continues the 2% inflation target for another five-year period, ending December 31, 2031.
The new term runs from January 2027 through December 2031. The target remains the midpoint of a 1% to 3% control range.
What the 2% figure measures
The agreement measures inflation by the consumer price index's change over 12 months. It calls for equal attention to inflation above and below the target, with flexibility to respond to economic shocks while bringing inflation back to target over time.
For households and businesses, this establishes the objective guiding monetary policy. A target for the overall price index is not a promise that each individual bill or purchase will rise by 2%.
Keep the policy target separate from loan pricing
The Bank conducts monetary policy independently within the jointly agreed framework. Today's announcement renews that framework; it does not announce a new policy interest rate or set a mortgage or savings-account rate.
Readers comparing the announcement with their own borrowing costs should distinguish the inflation target from the separate interest-rate decisions and account terms. The complete renewed agreement is linked below.
