The second way in which authorities can help is by maintaining a disciplined monetary policy. Monetary authorities must stay focused on their primary mission of preserving price stability, helping businesses and households to see through the cycle and promoting better decision making by keeping inflation low, stable, and predictable.
This is what Canada’s monetary policy framework now provides: greater focus, greater accountability, and greater discipline. The two key elements of our current framework are (i) an explicit monetary policy goal – the 2 per cent target for inflation – and (ii) a flexible exchange rate.