Canada’s central bank will maintain its current inflation target of two per cent, but will rely more on employment numbers to make policy decisions.

Since 1991, the Bank of Canada (BOC) has tried to keep inflation within one to three per cent, ideally at two per cent.

On Monday, it renewed its current inflation mandate with the federal government, which it does every five years.

The new focus of the latest agreement is supporting “maximum sustainable employment,” which is the highest jobs rate the economy can handle before inflation pressures kick in. The renewed mandate gives the bank added flexibility to adjust its policy to changing labour conditions.

Speaking to reporters in Ottawa, Finance Minister Chrystia Freeland said the bank can’t target inflation and employment at once.

“We are very explicitly … choosing not to do (a dual mandate),” she said Monday. “We are very clear in the mandate renewal that the paramount objective of the BOC is its inflation target of two per cent, within a one to three per cent band.”

Canada’s inflation skyrocketed to 4.7 per cent in October, the highest it’s been in nearly 20 years. The bank’s job is to adjust inflation to meet its target. It does this by either raising interest rates to cool inflation or cutting them to encourage spending and borrowing…read more.