Moving Monetary Policy Forward: Why Small Steps – and a Lower Inflation Target – Make Sense for the Bank of Canada

The Bank of Canada should lower its inflation target as part of a new monetary policy agreement due at the end of 2011, according to a study released today by the C.D. Howe Institute. In Moving Monetary Policy Forward: Why Small Steps – and a Lower Inflation target – Make Sense for the Bank of Canada, leading economist Angelo Melino explains why the Bank of Canada should keep its current inflation-targeting regime in the new agreement with the Department of Finance, but make several reforms, including a lower inflation target, to achieve some important goals.