First, it allows for meeting-by-meeting reassessments of the conditionally-expected medium-term path for interest rates that is required to deliver the two per cent target, in line with the incoming data and evolving outlook. The terminal rate over the projection horizon widely used as a short-hand summary indicator for the orientation of interest rate policy.
[1] It follows that a primary influence on the interest rate decision in any one meeting is the size of the gap between the prevailing interest rate and the assessed terminal rate. Second, at a tactical level, the exact calibration of the interest rate decision should also take into account the appropriate speed to close that gap.