Bank of Canada releases results from consultations on inflation and monetary policy

Why we reached out

Every five years, we renew our monetary policy framework with the federal government. Before every renewal, we conduct research and talk to experts about how effective the current framework has been at keeping inflation low, stable and predictable.

This time, we expanded these discussions to include a broad range of public interest groups and individual citizens.

We wanted to know what Canadians thought about the economy, our current monetary policy framework and the options being considered. We also asked questions about the Bank’s other policy tools.

That’s why we conducted surveys, focus groups and round-table discussions, and we invited written submissions from individuals and groups.

Why this matters

For the first time in 30 years, we’re comparing our current, flexible inflation-targeting framework against a range of other options:

• average inflation targeting
• dual mandate (that targets inflation and employment)
• nominal GDP targeting
• price-level targeting

So we need to explore how any changes might affect households and businesses. Conducting these consultations also allowed us to ask individual Canadians and groups about the policy actions we have taken in extraordinary times, such as our response to COVID‑19.

Talking to more people provides us with greater diversity of perspectives and gives us an opportunity to better explain our work. It is important that we understand what Canadians think and that Canadians understand our objectives and how we achieve them. Monetary policy works best when it’s well understood.

The input we received sheds light on how Canadians experience inflation and on their economic and financial concerns. This will help us as we reflect on our monetary policy framework. I would like to thank Canadians for their participation.”

Tiff Macklem, Governor

Have a look at our research, consultations and outreach leading up to the 2021 renewal.

What we heard

Our outreach showed that:

• public trust in the Bank and in the stability of Canada’s financial system has remained steady throughout the COVID‑19 crisis
• many Canadians have concerns about:
  • the future health of the economy
  • their personal finances
  • rising costs
  • job insecurity
  • wealth inequality
• people are confident that the Bank can keep inflation on target, and many support the current inflation-targeting framework over other options
• of the four alternatives being considered, people generally preferred the dual mandate and average inflation targeting over nominal GDP targeting and price-level targeting, finding them easier to understand
• there is general support for the Bank’s current quantitative easing program, and most people agreed that the Bank should signal that interest rates will remain low during the pandemic
• many Canadians do not support the use of negative interest rates even when the economy is in trouble

Overall, most people we heard from understand that inflation targeting helps keep the prices of goods and services under control. But they feel the inflation they experience is higher than 2 percent and question the accuracy of the consumer price index.Hear Deputy Governor Lawrence Schembri’s take on the difference between perceived and measured inflation.

What’s next

The full report on our 2019–21 consultations will be reviewed by the Bank’s Governing Council. Alongside our extensive research, this will help frame our discussions with the Department of Finance Canada later this year.

The federal government and the Bank will then formalize an agreement on the next framework that will guide monetary policy until 2026.Read the full report.