Bank Of Canada Will Not Review 2% Inflation Target

The Bank of Canada will not review its 2% annualized inflation target when its monetary policy framework comes up for renewal in 2026. Governor Tiff Macklem has shot down the idea of a change to the central bank’s inflation target, saying the 2% goal has proven beneficial to the Canadian economy and helps to anchor inflation expectations. The Bank of Canada and federal finance ministry review the central bank’s monetary policy framework every five years, with the next review scheduled for 2026. Under its current mandate, the Bank of Canada seeks to keep inflation at 2% per year, or the mid-point of a 1% to 3% range. Governor Macklem said the current 2% target will not be considered in next year’s review. “The two per cent target has proven its worth in achieving price stability over time,” Macklem said in a speech delivered in Mexico City. “We are already facing a more uncertain and unpredictable world. Now is not the time to question the target.” The review next year is expected to look at how the central bank responds to supply shocks, especially at a time when the Canadian economy is reorienting its supply chains. There are also plans to consider the best ways to measure core inflation, and the interaction between monetary policy, housing affordability, and inflation. After lowering interest rates to begin 2025, the Bank of Canada has held its trendsetting overnight interest rate steady for its last three policy meetings at 2.75%. Macklem said in his Mexico City speech that economic uncertainty stemming from U.S. tariffs is elevated and could lead to a rise in inflation. “Headwinds that limit supply could mean more upward pressure on inflation going forward,” he said. The Bank of Canada is scheduled to next decide on interest rates Sept. 17.