First, the clarity and simplicity of the 2 per cent target has facilitated its communication and broad acceptance, and that has helped enhance the target’s credibility. 8 See Table 1, Renewal of the Inflation-Control Target—Background Information—October 2016. -5-  Second, as inflation expectations have become firmly anchored at the 2 per cent target, the effectiveness of the policy has increased (Chart 2).
9 For example, during the global financial crisis of 2007–08, the Bank was able to aggressively reduce its policy rate and provide substantial monetary stimulus because inflation expectations were so well anchored. As a consequence, a reduction in the policy rate translated directly into a similar reduction in the real interest rate, which is necessary for stimulating demand.