Since we introduced inflation targeting in 1991, the Bank has been largely successful at keeping inflation low, stable and predictable. Today, that record is being seriously tested as we emerge from the first global pandemic in a century and face the effects of Russias unprovoked invasion of Ukraine.

Some have suggested that policy-makers need to engineer a substantial slowdownor even a recessionto get inflation back under control. But the best strategy for responding to high inflation needs to consider how people form their inflation expectations. If people understand and believe that the central bank will eventually bring inflation back to target, their expectations will remain anchored.

To achieve this, central banks must commit to a credible inflation target and communicate it clearly. In turn, this sets off a series of decisions on prices and wages that help keep inflation in line and reduces the need to create a significant economic downturn. This is the Banks focus.

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Anatomy of a pandemic: Applying old lessons and learning from new ones - Bank of Canada