and arduous process that came at the cost of several years of sub - par economic growth. in 1991, recognizing the importance of inflation to the economic and financial well - being of canadians and the central role of monetary policy in controlling inflation in the longer run, the bank began pursuing an explicit target for inflation. the results have been impressive. since 1991, inflation in canada, as measured by the consumer price index ( cpi ), has been remarkably stable. inflation has averaged 2 per cent ( chart 1 ), 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 affairs with greater certainty about the future purchasing power of their incomes and financial assets. real and nominal interest rates have also been lower across a range of maturities, in part, because they no longer include a substantial premium to compensate investors for inflation risk. more broadly, low, stable and predictable inflation has facilitated more stable economic growth in canada and lower and less - variable unemployment ( table 1 ). our inflation - targeting regime has also stood the test of the 2007 – 09 global financial crisis. as the fallout was hitting the canadian economy, the bank of canada responded. we eased monetary policy aggressively to forestall a deeper and more prolonged economic slump. inflation targeting gave us the flexibility to allow that strong policy response. it provided an analytical framework for calibrating how far we should go, and for how long. it also anchored the public ’ s confidence that, despite the extreme conditions of that period, policies would remain on track to achieve the 2 per cent inflation target. a particularly useful feature of our inflation - targeting framework is that, every five years, we renew our agreement with the federal government. the agreement sets the target for inflation and the parameters for achieving it. and the renewal process provides the opportunity and the discipline to reassess our approach in a systematic way and look for room for improvement. but the bar for any major change is high. we know that inflation targeting has turned out to be far superior to any other framework that has been tried. also, as i have stressed, part of canada adhered to bretton woods for only part of the post - war period. see m. bordo, t. gomes and l. schembri, “ canada and the imf : trailblazer or prodigal son? ” discussion paper 2009 – 1, bank of canada, 2009 ; and

that are likely to be temporary. the critical test is the confidence you have that inflation will remain within our target range. we would like the public to take 2 per cent inflation for granted. we don ’ t, however, take your confidence in us for granted. we know we have to earn your trust by delivering, without fail, on that commitment. a. cote, “ inflation, expectations and monetary policy ” ( speech to the association quebecoise des technologies, mont - tremblant, quebec, 19 february 2015. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches