Description
Abstract: In 1991, the Canadian government and the Bank of Canada agreed on targets for inflation reduction. The major lesson that we at the Bank of Canada draw from our experience with inflation control since then is related to the advantages of establishing a credible anchor for monetary policy by focusing on the predictability of inflation. Overall, it became increasingly evident through the last decade that the inflation target deals with expectational problems. It promotes a much greater degree of confidence and understanding than monetary targets or a vaguely expressed desire for price stability ever did.