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HoweCore inflation measures are good tools for internal use, but they can be confusing for the average CanadianLast updated 10 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.The Bank of Canada declined to provide a response to the C.D. Howe Institute's report, but said it is in the process of gathering views as it prepares to renew its framework for monetary policy later this year. Photo by HYUNGCHEOL PARK/PostmediaThe Bank of Canada’s communication around its monetary policy decisions is too technical and difficult for the general public to understand, and more emphasis needs to be made on how officials are planning on getting headline inflation back to the two per cent target, says a new report.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorThe report released on Tuesday by the C.D. Howe Institute recommended the central bank primarily focus on its projected headline inflation path over the policy horizon — typically the next six to eight quarters — along with a forecast of interest rates that would create this inflation path.This would allow policymakers to clearly explain how future overnight rates can bring inflation down to the two per cent target, which would influence people’s expectations of medium-term inflation.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againCurrently, policymakers rely on core inflation measures to guide their monetary policy decisions and communicate them to the public. The Bank of Canada also publishes four Monetary Policy Reports a year that contain headline inflation forecasts and core inflation measures, but little information about overnight rate forecasts that will guide it back to the two per cent goal.The report said core inflation measures are good tools for internal use, but they can be confusing for the general public. The central bank frequently changes its preferred core inflation measure and the associated analytical complexity is often out of touch with people’s inflation experiences, such as rising food, shelter and gasoline prices. This makes core inflation measures largely irrelevant for guiding people’s inflation expectations.“It’s difficult for the public to understand. They need to start de-emphasizing core measures as part of their communication strategy and instead focus on explaining more thoroughly how they’re getting inflation back down to two per cent,” Steve Ambler, one of the authors of the report and C.D. Howe Institute’s fellow-in-residence, said.“This could actually reinforce the central bank’s credibility. If it’s communicated well, the public should be able to understand it, and it reinforces the idea that the Bank of Canada is committed to getting inflation back to target within its typical forecast horizon.”The report comes as Bank of Canada and Government of Canada officials continue to review the country’s monetary policy framework, which is set to renew for another five years by the end of 2026.The cornerstone of the current framework is an inflation target of two per cent and within a range of one per cent to three per cent. The central bank said that in past renewals since 1995, this “framework has been found to be the best approach for maintaining price stability.”The Bank of Canada declined to provide a response to the C.D. Howe Institute’s report, but spokesperson Paul Badertscher said it is in the process of gathering views as it prepares to renew its framework for monetary policy later this year.However, the Bank of Canada is aware of communication lapses with the general public. Former deputy governor Rhys Mendes spoke about the challenges the central bank faces in measuring and communicating about underlying inflation in a speech at the Ivey Business School in London, Ont., last October.“We’ve long labelled one or more measures of core inflation as our ‘preferred’ measures. And we’ve said these preferred measures are ‘an operational guide to help the Bank of Canada achieve its inflation target,” he said.“At times, this language may have led markets to place more emphasis on the preferred core measures than we do. In practice, our preferred measures are just some of the many indicators we use to achieve our inflation target.”Ambler also said clear, open communication about how the central bank navigates inflation will cut through the political noise. He used the most recent technical recession as an example, which was heavily politicized by Liberal and Conservative MPs.Ultimately, he said that would allow people to stay informed even when forecasts are wrong.“Any forecaster worth their salt is going to make mistakes. Stuff happens all the time. There are constantly shocks that cause predictions to be off target,” he said.“The Bank of Canada has resisted this idea because they think if they publish an interest rate or a policy rate projection, then people are going to say this is what officials are promising to do no matter what happens. We still think it’s a good idea (to change communication strategies), but the Bank of Canada has to make it clear that if stuff happens, then projections will change.” Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.