Should monetary policy have been following a different course to ease some of the difficulties that our economy has encountered? During the last half of the 1980s, monetary policy sought to prevent excessive demand pressures from fuelling an accelerating trend of inflation. The intention was to put inflation on a gradual downward trend once the demand pressures subsided.
In February 1991, the Bank of Canada and the federal government made a formal commitment to price stability as the objective of monetary policy. To make the path to price stability more explicit, the Bank and the government agreed on specific targets for inflation control.