In other words, we care equally about deviations above and below 2 per cent. The 1 to 3 per cent range reflects normal variations in consumer price index (CPI) inflation, since it is subject to a wide variety of temporary shocks. These ongoing shocks make it impossible to hit the 2 per cent target consistently.
We aim to achieve the target by adjusting our policy rate, which directly influences interest rates for household and corporate borrowing. Doing so helps align demand for domestically produced goods and services with the economy’s capacity to supply them.