The Bank of Canada and federal government have renewed the central bank's five-year mandate, keeping the two per cent inflation target at its core.
The Bank of Canada and the federal government have agreed to keep a target of two per cent inflation at the core of the central bank's mandate, according to a release announcing the renewal of its five-year mandate.
The Bank of Canada sets its benchmark interest rate independently from the federal government, but it gets its inflation-targetting mandate from Ottawa. The bank said its inflation target has served Canadians well in recent decades.
The bank will continue to set monetary policy to make sure annual inflation dips neither too far below or above two per cent, the centre of a one-to-three per cent band. It retains flexibility to respond to economic shocks to support growth and a healthy labour market, according to the release.
"Against this backdrop, the government of Canada and the Bank of Canada still agree that the best contribution monetary policy can make to the well‑being of Canadians is to maintain low, stable, and predictable inflation," the release said.
The bank increased its benchmark interest rate by a quarter point to 2.5 per cent on Oct. 28, its first hike in more than three years. Inflation rose to 3.1 per cent in September as monetary policymakers fear inflationary pressures from the war in the Middle East could soon start to spread.
The bank announced the mandate renewal minutes after the federal Liberals outlined the government's economic projections and fiscal track in Budget 2026 on Thursday.
The renewal keeps the Bank of Canada's inflation-targeting framework in place for another five years, maintaining the two per cent target as the central anchor for monetary policy decisions.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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