The Bank of Canada Act should be updated to better protect the central bank’s independence, according to a new report released Tuesday by the C.D. Howe Institute. The recommendation comes ahead of the federal government’s next scheduled five-year review of the Bank’s policy framework in 2026.

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The central bank has already suggested that the upcoming review will tackle improvements in measuring underlying inflation and examine how monetary policy affects housing affordability. Governor Tiff Macklem has stressed that the Bank’s two-per-cent inflation target will remain unchanged. Deputy governor Rhys Mendes recently added that the Bank may reconsider its long-standing practice of calling core inflation its “preferred” gauge of price trends.

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The C.D. Howe report, “Don’t Take It for Granted: Strengthening the Bank of Canada’s Independence,” argues that safeguarding the Bank’s autonomy is increasingly important amid rising political pressure on central banks, particularly in the United States.

“Storm clouds are on the horizon, especially given the political pressure being applied on the Fed south of the border,” said co-author Steve Ambler, an economics professor at Université du Québec à Montréal and the institute’s David Dodge chair in monetary policy. “Canada needs to act now, starting with targeted amendments to the Bank of Canada Act.”

Their primary recommendation is to revisit the section of the Act that permits the federal government to issue directives to the Bank. The authors suggest tightening this provision so that such directives are used only in exceptional circumstances—and, if invoked, must be publicly disclosed through Parliament, with the finance minister required to table a motion in the House of Commons.