Inflation-control targets were adopted inFebruary 1991 for a five-year period byagreement between the Government ofCanada and the Bank of Canada. Theinflation rate in 1991 was 5.9 per cent asmeasured by the consumer price index. The initial goal was to reduce inflation toprogressively lower levels, first to 3 per cent,then to 2.5 per cent, then to 2 per cent, toensure a climate favourable for long-lastingeconomic growth. By December 1993,inflation had been reduced to 2 per cent. Atthat time, the government and the Bankagreed to extend targets for three more yearsto the end of 1998. The target range was 1to 3 per cent. In February 1998, with inflation well-contained in the range, the existing targetswere extended to the end of 2001. Thegovernment and the Bank agreed that beforethat time they would jointly determine an‘‘appropriate long-run target consistent withprice stability.’’An important tool for monetary policyThe inflation-control targets assist the Bankin determining what
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