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April 20, 2021

Central Bank’s Inflation Targeting Doesn’t Need Overhaul

  • In this report, leading monetary economist Stephen Williamson evaluates the alternatives to the Bank’s current inflation-targeting agreement, and finds that none of the other options are likely to improve upon the current agreement that has served Canada well since 1991. 
  • Williamson concludes the Bank of Canada should not overhaul its 2 percent inflation-targeting regime when it comes up for renewal later this year.
  • He argues inflation targeting has been an effective tool for Canada. The Bank of Canada has been successful in keeping inflation close to its 2 percent target since its adoption, with inflation falling within the 1 percent to 3 percent bounds, for the most part. And success in hitting the inflation target has been consistent with good macroeconomic performance.
Stephen Williamson

Stephen Williamson is Professor of Economics at Western University, where he holds the Stephen A. Jarislowsky Chair in Central Banking. He is also a Bank of Canada Fellow. Prior to arriving at Western in 2017, he was Robert S. Brookings Distinguished Professor in Arts and Sciences at Washington University in St. Louis and the Chester A.