Clarifying and enhancing roles Before the adoption of our current inflation-targeting framework, the goals of monetary policy were unclear.18 Market participants often perceived that the Bank of Canada placed some weight on stabilizing the exchange rate as an objective for monetary policy, clouding its role and diminishing its ability to respond to external shocks.
However, the primary goal of monetary policy became much clearer once inflation targeting was adopted, especially as the 2 per cent target gained credibility.