The Bank of Canada (BOC) will maintain its 2% inflation target for the next five years, but has formally been given license to moderately overshoot it to “support maximum sustainable employment.”
In a mandate renewal
released jointly with the Canadian government, the government directed the central bank to use monetary policy to boost employment levels as long as those efforts don’t jeopardise the broader objective of stable prices.
The move effectively gives Governor Tiff Macklem more latitude to keep interest rates lower than what they would have been had the focus remained squarely on inflation number — though the central bank and government argued the new mandate only formalises what was already an implicit part of recent Bank of Canada policy. At a press conference, both Macklem and Finance Minister Chrystia Freeland said there was no real change in the framework that will guide rate decisions.
Since the 1990s, the bank has been narrowly focused on a single objective: to keep prices stable.