Bank of Canada to Maintain 2% Inflation Target Amidst Trade Tensions
Ottawa, February 21 (Reuters) - The Bank of Canada's longstanding 2% inflation target should remain intact in its upcoming 2026 review, Governor Tiff Macklem declared on Friday.
This is the first instance where a Governor has voiced their position on the target ahead of the formal consultations. Macklem emphasized the need to address pressing risks, particularly the potential impact of U.S. tariffs on the Canadian economy.
"It is not the time to question the target that has played a crucial role in maintaining price stability," Macklem stated during a speech in Mississauga, Ontario.
Under the current monetary policy framework, the Bank's mandate is to keep inflation within a 1% to 3% range, with 2% as the midpoint. The 2026 review will determine the Bank's future priorities.
Macklem reiterated the severe economic consequences that could arise from President Trump's proposed tariffs on Canadian imports. He emphasized that while Canada may eventually recover its current growth rate, the overall output would suffer permanent damage.
"It's not just a shock – it's a structural change," Macklem said.
The Bank will explore enhancements to its monetary policy toolkit, refine inflation measurement techniques, and examine the interaction between housing and monetary policy.
Macklem highlighted that while monetary policy cannot prevent higher prices, its role is to ensure that these increases do not escalate into ongoing inflation.
"Put simply, monetary policy needs to make sure that the rise in inflation is temporary," he concluded.
Keywords: CANADA CENBANK/