MNI BRIEF: BoC Adds Max Employment Goal to 2% CPI Mandate

The Bank of Canada on Monday added a new mandate to seek maximum employment when possible within its primary goal of targeting 2% inflation, a move few expected and the biggest overhaul of an agreement with the government since CPI targeting was introduced three decades ago. The move away from a single inflation target included half a dozen references to maximum or inclusive employment, several mentions of inequality and a commitment to incorporate climate change into economic projections.

The BOC will use "flexibility" to pursue full employment when consistent with "price stability" such as keeping inflation within its 1%-3% target band and medium-term inflation expectations "well anchored" at 2%, the statement said. Changes in the global economy mean the policy interest rate may remain low for longer than usual, rise more slowly, and other tools like forward guidance and balance-sheet expansion may be used more often, according to a separate BOC background paper.

The Bank has said that while it’s watching upside inflation risks, prices should slow in the second half of next year. The joint statement Monday called inflation elevated while also noting it's a global phenomenon.