Inflation Targeting 101 The Bank’s mandate is to mitigate “…fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.”2 High and volatile inflation in the 1970s and 1980s taught us that the best way for us to achieve these objectives is to keep inflation low, stable and predictable.
When we adopted our inflation-targeting monetary policy in 1991, we were virtually alone. No other G-7 country was doing this. New Zealand, the first country to adopt inflation targeting, had done so only nine months before us. And there was very little in the academic literature on inflation targeting.