This is a preview of a premium article. Subscribe or Log In to gain access.

The Bank of Canada’s policy of “inflation targeting,” which seeks to keep the rate of inflation between 1 and 3 per cent, has the support of an overwhelming majority of Canadian academic and business economists. The monetary instrument to deploy when the inflation rate is outside of this desired range is short-term interest rates – raise them when inflation is above the target range and lower them when below. A key if unstated corollary is that the value of the loonie is to be allowed to float freely – the exchange rate is ignored in calibrating monetary policy.

Subscribe or Log In to read more.