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OTTAWA — The Bank of Canada and federal government have agreed to keep a target of two per cent inflation at the core of the central bank’s mandate.
The Bank of Canada sets its benchmark interest rate independently from the federal government but it gets its inflation-targetting mandate from Ottawa.
In a release announcing the renewal of its five-year mandate on Thursday, the bank said its inflation target has served Canadians well in recent decades.
Monetary policymakers have argued the inflation target helped guide the central bank’s interest rate decisions to tame rapidly rising prices during the COVID-19 pandemic recovery.
The Bank of Canada tries to counter inflationary pressures by raising its policy rate, and conversely stimulates economic growth by lowering the rate.
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.
Bank officials expect the target will continue to guide monetary policy through structural changes in the economy such as the rise of artificial intelligence and shifting demographic trends.
“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.
This report by The Canadian Press was first published Nov. 5, 2026.
Craig Lord, The Canadian Press
