These models show us a view of certain parts of the economic picture, but we will never have a single tool that can provide the complete picture by itself. Risk management in monetary policy So, given that we’re working with an incomplete picture of the economy, what is a central bank to do?
At the Bank of Canada we take a risk-management approach to monetary policy. Let me explain what that means, and what it doesn’t mean. Since the early 1990s, inflation targeting has become increasingly popular among central banks, and Canada was an early adopter.