If you saw a stop light ahead, you would begin letting up on the gas to slow down smoothly. You do not want to have to slam on the brakes at the last second. Monetary policy must also anticipate the road ahead. Right now, slack in the economy is still translating into inflation that is below our target.
Headline inflation stood at 1.6 per cent in April, in part because of the transitory effects of competition among food retailers. We look at several measures of core inflation to see past the transient volatility in headline inflation.5 These measures have drifted down in recent quarters and range from 1.3 to 1.6 per cent.