The Bank of Canada will maintain its 2 per cent inflation target in a mandate review that will be announced in coming days, according to a person familiar with the matter.

The new five-year mandate, however, will include some new language around employment, the person said on condition they not be identified because the announcement isn’t yet public. 

Economists weren’t expecting a major overhaul of the 2 per cent target, though there was some speculation that Prime Minister Justin Trudeau’s government would make tweaks that allow the central bank to tolerate higher inflation -- giving it scope, theoretically, to go slower on rate hikes. But any arguments in favor of a big change were weakened as inflation accelerated in recent months, and the focus of policy makers turned toward bringing price pressures under control.

The current mandate expires on Dec. 31. In the past two decades, no review has gone into December. Trudeau’s delay had cast some uncertainty on the timing and pace of the Bank of Canada’s interest rate trajectory.

Reuters was first to report the details of the new agreement between Trudeau’s government and the Ottawa-based central bank. 

Right now, investors are pricing in five hikes next year amid growing inflation worries. Governor Tiff Macklem held the benchmark interest rate at 0.25 per cent in a policy decision Wednesday, maintaining guidance that borrowing costs could begin increasing as early as April. 

“That’s what we were expecting. I think the bar to change the bank’s inflation targeting framework has always been high,” Josh Nye, an economist at Royal Bank of Canada, said by phone. “They’ve really emphasized the flexibility in their framework and that provides some leeway in taking the labor market backdrop into account while also having inflation as the primary monetary policy objective.” 

Pressed about it Wednesday in the legislature, Trudeau said the government intends to renew the central bank’s mandate but offered no details on the content or timing of the deal.

Bigger options for change included an explicit dual mandate targeting both employment and inflation, or average inflation targeting like the U.S. Federal Reserve adopted last year that allowed it to overshoot its own 2 per cent target. 

But any major changes could have backfired on the government at a time when price increases are already near three-decade highs, stoking inflation and wage expectations further.   

Since the 1990s, the bank has been narrowly focused on a single objective: to keep prices stable. The goal has been to keep inflation within a range of 1 per cent to 3 per cent as much as possible. Operationally, that’s meant aiming for a 2 per cent target over the Bank of Canada’s forecast horizon, a period of about two years.

There’s some leeway, though. The central bank has scope to delay the return to target beyond the two-year span. Macklem and his officials also have discretion to put more weight on certain risks over others.

Because the current system already provides flexibility, many economists are largely supportive of the status quo -- including at the Bank of Canada.