OTTAWA -- The Bank of Canada's two percent inflation target should be maintained in a review set for 2026, Governor Tiff Macklem said on Friday, saying central bank needed to focus on risks such as the imposition of U.S. tariffs.

The bank and the finance ministry jointly review the target every five years and formally announce a decision. Macklem's remarks marked the first time a governor has said what the target should be before the consultations have even started.

"In my view, now is not the time to question the anchor that has proven so effective in achieving price stability," Macklem said during a speech in Mississauga, Ontario.

The bank's mandate under the current monetary policy framework is to keep inflation at the mid-point of a one percent to three percent target range.

The 2026 review of the monetary policy framework will produce an agreement on the bank's priorities.

"With trade conflict on our doorstep, we need to focus our resources on the most pressing and important issues for our framework review," said Macklem.

He reiterated that if U.S. President Donald Trump went ahead with a threat to slap tariffs on all imports from Canada, the economic effect would be severe.

"We may eventually regain our current rate of growth, but the level of output would be permanently lower," Macklem said, referring to the bank's latest economic modeling. He contined: "It's more than a shock — it's a structural change."

He said the bank would consider whether it needed what he called a richer playbook for monetary policy, how inflation could be measured better, and the interaction of monetary policy with housing.

Macklem said U.S. tariffs and subsequent retaliation from Canada could almost wipe out any domestic growth in 2025 and 2026 and cause a one-time spike in inflation.

"What monetary policy can - and must do - is ensure that higher prices do not become ongoing inflation," he said.

"Simply put, monetary policy needs to ensure the increase in inflation is temporary."