Bank of Canada, Ottawa renew 2% inflation target to 2031

OTTAWA – The Bank of Canada and the federal government agreed Thursday to keep the 2 per cent inflation target at the core of the central bank’s mandate for another five years, through Dec. 31, 2031.

The two sides announced the renewal of the monetary policy framework in a joint statement. The target stays at 2 per cent, the midpoint of a 1 to 3 per cent control range, with inflation measured as the 12-month rate of change in the consumer price index.

The statement said monetary policy will continue to be conducted symmetrically, with equal emphasis on inflation above and below the target. It also said the bank will keep using the flexibility in the framework to respond to economic shocks while focusing on returning inflation to target over time.

The bank sets its benchmark interest rate independently, but its inflation-targeting mandate comes from Ottawa, and the two review it every five years. The Canadian Press reported that the bank said the target has served Canadians well in recent decades.

The statement looked back on the past five years, when supply-chain disruptions, shifts in demand and geopolitical conflicts pushed up inflation around the world. It said the bank acted forcefully to restore price stability and that inflation returned to the 2 per cent target and the 1 to 3 per cent range. The bank views the period “not as a failure of the framework’s design, but as a challenge to its implementation amid extraordinary global shocks,” the statement said. It added that the bank has strengthened its ability to assess how supply-side shocks pass through to Canadian inflation.

The renewal comes as the bank has begun raising rates again. It raised its key rate to 2.5 per cent on Oct. 28, its first increase since 2023, a move that adds about $68 a month to a $500,000 variable-rate mortgage.

The statement said the framework is being renewed while the economy faces profound change and heightened geopolitical uncertainty, including shifting trade patterns, reconfigured supply chains, demographic change and the spread of artificial intelligence. It said low, stable and predictable inflation remains the best contribution monetary policy can make to Canadians’ well-being.

The statement also said that, while keeping inflation low and well anchored remains the primary focus, the framework allows flexibility to support economic growth and strong, stable labour market outcomes.

For households, the decision means no change to the yardstick the bank uses to judge its rate decisions. Our Budget 2026 explainer covers how inflation and other federal measures affect household costs.

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