A primer on inflation targeting : ABC du ciblage de l'inflation

On 8 November 2011, the Bank of Canada and the federal government renewed their inflation-targeting agreement, which guides monetary policy in Canada. Monetary policy is focused on how much money is circulating in the economy and what that money is worth, while inflation can be defined as a persistent rise in the average price of goods and services or the "cost of living." The main objective of Canada's monetary policy, the conduct of which is the responsibility of the Bank of Canada, is to keep inflation low and stable. "Inflation targeting" refers to a system in which monetary policy decisions are made, implemented and communicated according to a clearly stated inflation target or target range. Debates about the merits of such a monetary policy framework have been occurring in Canada for at least two reasons: global instability associated with the recent financial and economic crisis, and consideration of the merits of changes to the 2006 inflation-targeting agreement between the Bank of Canada and the federal government.