01:11 PM EDT, 03/20/2025 (MT Newswires) -- In a speech before Calgary Economic Development in Alberta on Thursday, Governor Tiff Macklem said at the most fundamental level, the central bank is "anchored" by its monetary policy framework, its 2% inflation target.

He added: "We cannot resolve trade uncertainty, but there can be no doubt about our commitment to low inflation. Canadians need to have confidence that we will maintain price stability over time, even during periods of global upheaval.

"We know that some prices will rise when the tariffs hit, that's not something monetary policy can stop. What monetary policy can, and must, do is prevent those initial, direct price increases from spreading. We must ensure that higher prices from tariffs do not become ongoing generalized inflation. Simply put, we need to make sure that a tariff problem doesn't become an inflation problem.

"To do that, we're doing three things.

"First, we're tracking cost increases through to consumer prices. Once prices have gone up to reflect the tariffs, a one-time increase, we want to see prices stabilize at that higher level, at least until the tariffs are dropped. We don't want to see price increases become more broad-based or inflation expectations start to move significantly away from target.

"Second, we're improving our analysis to better inform our policy decisions. We've built better and richer multi-sector economic models as well as models that better account for links between Canada and the world. The Bank is using these new models to analyze different tariff scenarios.

"Finally, we're doing more outreach across Canada, both in-person and digitally. We are being nimble with our surveys so we can reach companies and households quickly.

"We can't reduce uncertainty about US trade policy. But we are doing our best to reduce the uncertainty about the impacts of tariffs. All this work informs our monetary policy deliberations.

"Still, we need to confront the reality that, like everyone else, we are taking decisions against a background of pervasive uncertainty. This affects how we take monetary policy decisions.

"Let me explain.

"In normal times, when Governing Council meets, we agree on an economic projection that is our view of the most likely outcome for the economy. That projection is based on economic data, surveys and the historical relationships captured in our models. That's our base case. And then we discuss the risks around that outlook. Our monetary policy discussions are geared toward deciding on the best monetary policy given the most likely outcome for the economy and the risks around that outcome.

"But in a situation of pervasive uncertainty, it's very hard for any of us on Governing Council to have high conviction about the most likely outcome. Several outcomes can all look plausible. Different people will weigh the various factors differently. That's natural, and it's one of the benefits of having diverse perspectives around the table.

"When we have this high degree of uncertainty around the base case, we give more consideration to the risks. Our focus is less about the best monetary policy for a specific economic outlook and more about policy that works for different outcomes. To see why, consider the alternative. If we were to guess where the economy is heading and make policy to optimize that outcome, we'd risk getting it wrong. Our actions could be ineffective or even make the outcome worse. So we need to set policy that minimizes the risk. That means being less forward-looking than normal until the situation is clearer. And it may mean acting quickly when things crystallize. We need to be flexible and adaptable."