In principle, the MSS is designed to sterilise excess capital flows that are deemed to be durable or semidurable. In practice this is difficult to discern ex-ante: hence the range of MSS instruments in terms of their duration can effectively modulate the sterilisation on an ex-post basis.
The target aims to keep the annual rate of inflation, as measured by the CPI, close to 2 per cent – the midpoint in a range of between 1 and 3 per cent. The agreement sets out one clear objective – the inflation target – and the Bank is accountable to Canadians through its open and transparent communication of success in achieving that objective.