agathe cote : inflation targeting in the post - crisis era remarks by ms agathe cote, deputy governor of the bank of canada, to the calgary chartered financial analyst ( cfa ) society, calgary, alberta, 18 november 2014. * * * introduction thank you for the invitation. i am pleased to be here. one of my main responsibilities at the bank is overseeing the analysis of domestic economic developments in support of monetary policy decisions. it is always very helpful to meet the people and visit the places behind the economic trends we are tracking. my speech today is about inflation targeting. it might be difficult to imagine now, but back in the 1980s, interest rates on mortgages topped 20 per cent. that, of course, was before we signed a pioneering inflation - control agreement with the federal government in 1991. canada was the second country in the world – after new zealand – to adopt an inflationtargeting regime. it is not often you can say that a product worked better than advertised. inflation targeting has. it has easily exceeded our expectations. since 1991, inflation in canada, as measured by the consumer price index ( cpi ), has averaged 2 per cent, and its variability has fallen by roughly two - thirds. canadians have benefited in a number of important ways. greater price stability has allowed consumers and businesses to manage their finances with more certainty about the future purchasing power of their savings and income. real and nominal interest rates have also been lower across a range of maturities. as a result of these developments, low, stable and predictable inflation has encouraged more solid economic growth and a well - functioning and more stable labour market. in addition, our inflation - targeting regime provided both a beacon and an anchor as we navigated the global financial crisis. the inflation - targeting agreement is renewed with the federal government approximately every five years. the agreement sets the inflation objective at 2 per cent – the midpoint of a 1 to 3 per cent target range – and gives the bank effective independence for achieving it. it was last renewed in 2011. we view these periodic reassessments as an essential element of our commitment to good governance. with the next renewal set for 2016, i want to talk to you today about the key issues that we reviewed in 2011, major developments since then and outstanding questions that we will be analyzing over the next two years. i want to emphasize at the outset that nothing ’ s broken. our flexible inflation - targeting regime has served canadians well, both in calm and turbulent

) : 19 – 29. see box 2, monetary policy report, april 2014. the common component uses a factor model to extract the component of inflation that is common across the individual series that make up the cpi. see m. khan, l. morel and p. sabourin, “ the common component of cpi : an alternative measure of underlying inflation for canada, ” bank of canada working paper no. 2013 – 35, october 2013. bis central bankers ’ speeches transparency is important to us. we will keep the public informed about the progress of our work over the next two years. we are assembling on our website material related to the framework and research we are undertaking in the run - up to the 2016 renewal. one thing is certain : no matter what is decided, the most important contribution that a central bank can make to the economic well - being of households and businesses is the achievement and maintenance of low, stable and predictable inflation. this will not be sacrificed. the only question, as always, is whether it can be delivered in an even more effective and reliable manner. thank you. bis central bankers ’ speeches