Sylvain Chalut

The Monetary Policy Report from the Bank of Canada presents an overview of the Canadian economic outlook, highlighting disruptions from US tariffs and trade uncertainty, with expectations for modest growth and inflation near 2%. The report details current economic conditions, analyzes inflationary pressures, and examines global economic trends. It provides projections for GDP and inflation, while also assessing risks stemming from geopolitical events and the review of the Canada-United States-Mexico Agreement (CUSMA).

The press conference includes discussions on raising the policy interest rate by one percentage point to address high inflation, which is affecting the Canadian economy. Key considerations include the need to restore price stability, address the overheated Canadian economy with labor and goods shortages, and achieve a soft landing by preventing high inflation from becoming entrenched. The council decided to front load the path to higher interest rates. Discussions also covered measures of inflation expectations and the impact of interest rate increases on the housing market and consumer spending.

The document outlines the renewal of Canada's inflation-control target, setting the goal to maintain inflation at 2 per cent, with a control range of 1 to 3 per cent, until 31 December 2011. It reflects on Canada's successful inflation-targeting regime since 1991, which has led to low and stable inflation, benefiting consumers and businesses. The document also discusses key issues such as the role of core inflation, the appropriate time horizon for returning inflation to target after economic shocks, and the implications of asset-price movements. Furthermore, it details a research program to explore potential improvements to the monetary policy framework, including the possibility of targeting a lower rate of inflation or a price-level path instead of inflation.

The Bank of Canada's 2016-18 Medium-Term Plan (MTP) focuses on reinventing central banking, renewing ways of doing business, and reinforcing a culture of innovation. Key areas of focus include advancing monetary frameworks, incorporating financial stability considerations, ensuring effective payment systems, and exploring alternative futures. The plan aims to enhance the bank's connections with domestic and international partners, improve its resilience, and foster a culture that supports innovative ideas and knowledge sharing.

The document discusses the renewal of Canada's inflation-control target, which is set at 2 per cent, with a control range of 1 to 3 per cent around this target. It reviews Canada's experience with inflation targeting, the potential for targeting a lower rate of inflation, price-level targeting, monetary policy and financial stability, the future research agenda, and the Bank's flexible approach to inflation targeting.