Inflation-control target, along with flexible exchange rate, is the main instrument of the monetary policy of the Bank of Canada. The target inflation rate renewed by the Bank most recently in October 2016, is aimed at keeping consumer price inflation in Canada at the level of 2 percent midpoint of a target range of 1 to 3 percent over the five-year period up to 2021. Such inflation rate is believed to preserve the value of money by keeping low, stable and predictable prices.
As of 2016, CPI inflation in Canada was in the bottom half of the target range - at the level of 1.5 to 1.7 percent. In 2017, inflation is expected to rise by the major international agencies including IMF, UN, EC, OECD and EIU approaching to the midpoint of the target range and achieving the level of 1.8 to 2.2 percent. In 2018, inflation in Canada is projected to change little or even slightly decrease. Agencies which produce projections for the period beyond 2018, namely, IMF and EIU, expect Canadian inflation rate to fall in 2019 with subsequent gradual rebound to the target level in the next two years.
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