The Bank of Canada will consider how its policies affect housing affordability as part of its next five-year monetary policy framework review.
In a speech delivered Tuesday in Mexico City, Governor Tiff Macklem said the Bank is preparing for its 2026 renewal by examining how monetary policy interacts with a housing market that has become increasingly unaffordable for many Canadians.
“Monetary policy cannot directly increase the supply of housing—that’s an issue for elected governments,” Macklem said. “But, through interest rates, monetary policy does have a direct effect on the demand for housing. And housing is a big part of the consumer price index in Canada, so the cost of housing affects inflation.”
“Therefore, it’s worth examining how monetary policy affects housing sector dynamics, and how best to factor housing affordability into our focus on overall price stability,” he added.
The comments mark one of the clearest acknowledgments yet that the Bank intends to account more explicitly for housing in its framework discussions.
The review will also consider how best to measure core inflation in a world prone to frequent supply shocks, Macklem noted. However, he confirmed that the 2% inflation target, in place since 1995, will not be reconsidered.
The Bank’s monetary policy framework is reviewed every five years in partnership with the federal government. The last review, completed in 2021, reaffirmed the 2% target and explored alternatives such as price-level targeting and nominal GDP targeting.
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Last modified: August 26, 2025