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Article: Monetary Policy Formulation: The Process in Canada; Inflation Targeting has been Successful.
- Article from:
- Business Economics
- Article date:
- October 1, 2001
- Author:
CopyrightCOPYRIGHT 2001 The National Association for Business Economists. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Experience in Canada and elsewhere has demonstrated that inflation targeting is a clear and effective way of achieving low inflation. As a result, financial, product, and labor markets have adjusted their longer-term inflation expectations and have reduced risk premiums that compensate for inflation uncertainty. Moreover, inflation targets are easily communicated, thereby enhancing credibility and transparency, which are increasingly recognized as desirable elements of the monetary policy process. Effective, timely communication of monetary policy is also important in achieving transparency. Specific actions of the Bank of Canada to implement these principles are presented ...