In 1991, the Bank of Canada became the second central bank (after New Zealand) to adopt inflation targeting. And over the next 10 years, many other major central banks joined the inflationtargeting club. At the time, it was hard to argue with the results.
Inflation targeting was seen as a key contributor to the “Great Moderation” – a period of about 15 years of steady economic growth and low and stable inflation in most advanced economies. In Canada, and elsewhere, consumers and businesses could make longer-term financial plans with more confidence. Interest rates were lower, and economic cycles were more moderate.