Explaining the Path to 2 Percent: A New Approach to Bank of Canada Communications

June 16, 2026 – The Bank of Canada’s use of multiple measures of underlying inflation is important for properly executing monetary policy, but risks undermining public understanding of monetary policy and complicating efforts to communicate its policy stance clearly, according to a new C.D. Howe Institute report.  

In “The Bank of Canada’s Communication Conundrum: How to Explain Inflation,” authors Jeremy Kronick, Steve Ambler and Thorsten Koeppl recommend that the Bank of Canada rely less on multiple measures of core inflation in its public communications and propose it provides Canadians with a clearer explanation of how current and future interest-rate decisions will keep headline inflation anchored at its 2 percent target. 

“The Bank’s communication should be anchored in headline inflation, since it is the measure Canadians see reported most often and readily understand,” says Kronick, President and CEO of the C.D. Howe Institute. “The focus should be on clearly explaining how policy will keep inflation at 2 percent and ensuring it is understood that when economic conditions change, the policy rate will adjust accordingly.” 

The report notes that core inflation measures remain valuable tools for policymakers because they help identify underlying inflation trends. The authors argue, however, that these measures are better suited to inform policy decisions than explain them to the public. The Bank’s shifting emphasis among different measures can create confusion and leave the impression that these indicators are themselves targets rather than inputs into policy decisions. The authors argue that effective communication for the Bank should focus on explaining how it intends to achieve its 2 percent inflation target. 

“Trust is built when institutions clearly explain both their objectives and how they intend to achieve them,” says Ambler, a professeur émérite at the Université du Québec à Montréal and the Institute’s David Dodge Chair in Monetary Policy. “Canadians should be able to see the connection between the Bank’s inflation outlook, its interest-rate decisions, and its commitment to maintaining stability.” 

To improve transparency and accountability, the authors recommend that the Bank of Canada reduce its emphasis on core inflation measures in public communications and instead place greater focus on headline inflation and its projected path. They also suggest that, in line with several central banks internationally, the Bank should publish an interest rate path alongside its inflation projections at policy announcements. This would give Canadians a clearer understanding of how policymakers expect inflation to evolve, and how interest rates may need to adjust if economic conditions change. The report emphasizes that any published rate path should be presented as conditional on incoming data, helping to avoid surprises while preserving the Bank’s ability to respond flexibly to new information. 

“Publishing an interest-rate path would strengthen the Bank’s communications by showing how it expects to achieve its inflation objective,” says Koeppl, professor at Queen’s University and Scholar in Financial Services and Monetary Policy at the Institute. “When circumstances change, policy rates may need to change as well. Being transparent about that relationship would improve accountability, reduce uncertainty, and reinforce confidence in the Bank’s commitment to keeping inflation at 2 percent.” 

Read the Full Report 

For more information contact: Jeremy Kronick, President and CEO, C.D. Howe Institute; Steve Ambler, Fellow-in-Residence and David Dodge Chair in Monetary Policy, C.D. Howe Institute; Thorsten Koeppl, Fellow-in-Residence and Scholar in Financial Services and Monetary Policy, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org. 

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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