To the surprise of very few observers, the Bank of Canada is sticking to the policy that got it to its (quite enviable) current situation:

Joint Statement of the Government of Canada and the Bank of Canada on the Renewal of the Inflation-Control Target

The primary objective of Canada’s monetary policy is to enhance the
well-being of Canadians by contributing to sustained economic growth,
rising levels of employment and improved living standards. Experience
has clearly shown that the best way monetary policy can achieve this
goal is by giving Canadian households and businesses confidence in the
value of their money.

It has been 15 years since Canada adopted an inflation-targeting
framework to guide its monetary policy. During this time, Consumer
Price Index (CPI) inflation has been reduced to a low, stable and
predictable level of close to 2 per cent, real output has expanded at
an average rate of 3 per cent per year and the unemployment rate has
fallen to 30-year lows. Although a generally supportive international
environment, coupled with significant domestic economic reforms and a
prudent fiscal policy track, has played an important role in these
positive developments, a key contributor has been Canada’s monetary
policy under the inflation-targeting framework. The joint commitment of
the Government of Canada and the Bank of Canada to the inflation
targets has helped anchor inflation expectations. It has also provided
a more stable and certain economic environment in which Canadians can
make their investment and spending decisions.

Based on this positive experience, the Government of Canada and the
Bank of Canada agree to renew the inflation target on the following
basis:

• The target will continue to be defined in terms of the 12-month rate of change in the total CPI.
• The inflation target will continue to be the 2 per cent mid-point of the 1 to 3 per cent inflation-control range.
• The agreement will run for another five-year period, ending 31 December 2011.

The Bank will continue its ongoing research into potential
improvements in the monetary policy framework. Before the end of 2011,
the Government and the Bank will review the experience over the period
and the results of the research, and determine the appropriate target
for the years ahead.

There have been a few counter-proposals suggested over the past few weeks: raising the target to 3%, lowering it to 1%, and aiming at a target for the path of the price level (as opposed to its rate of increase). But none of them offer compelling arguments that would lead us to believe that these policy changes would generate benefits that would outweigh the possible costs of a) getting the new policy wrong, and b) undermining the stock of credibility that the Bank has accumulated over the past 15 years.