The Bank of Canada is still committed to fighting inflation, David Dodge, governor of the Bank, said Monday.

Dodge said Canada’s economic record over the past 15 years demonstrates the value of focusing monetary policy on keeping inflation low, stable, and predictable. “It is the best means of fulfilling our commitment to promote the economic and financial welfare of Canadians,” Dodge said in a speech to the Regina Chamber of Commerce.

He said the Bank is conducting and encouraging research to see if there are any refinements that could improve its inflation-targeting agreement with the federal government. But the Bank expects the fundamental elements to remain the same when that agreement is renewed next year, Dodge said.

“From the Bank’s point of view, the basic arrangement of aiming inflation at the 2% midpoint of a 1% to 3% target range has served Canadians well, along with the use of the total [consumer price index] as the target, and a measure of core inflation for operational purposes,” he stressed.

Dodge noted that recent research, while still inconclusive, provided a little more support for a lower target. “Of course, we will continue to look at this question, but the evidence would have to be quite compelling before the target would be changed,” he said.

“Another issue that we continue to examine is whether we should target the actual level of prices rather than the inflation rate,” he added. “We are still working at building better analytical tools and methods to examine these questions, and we will continue to look at new evidence as it becomes available down the road.”

Another issue the Bank is studying is the appropriate time frame for returning inflation to target following various kinds of shocks. “Given the success we have had to date in dealing with various shocks within an 18- to 24-month horizon, we should not change that horizon lightly. But as inflation targeting and the global economy evolve, we will need to continue considering the appropriate time horizon and some of the other issues I discussed today,” he said.

“With inflation targeting, monetary policy is more focused, our communications are clearer, and inflation expectations are more solidly anchored,” he concluded. “From my perspective, inflation targeting is the best anchor we’ve seen.”

Canada was the second country after New Zealand to adopt explicit inflation targets. But over the past decade and a half, about 20 other central banks also have adopted this framework, he added. And he suggested it seems likely that other countries will join the ranks in coming years. “Indeed, just last week the central bank of Turkey announced that it will move to formal inflation targeting next year. Inflation targeting is also being discussed in the United States where Ben Bernanke, Alan Greenspan’s designated successor at the Federal Reserve, has been an enthusiastic proponent,” he said.