With regard to our price-stability mandate, while the new statement maintains our definition that the longer-run goal for inflation is 2 percent, it elevates the importance—and the challenge—of keeping inflation expectations well anchored at 2 percent in a world in which an effective-lower-bound constraint is, in downturns, binding on the federal funds rate.
The depreciating Canadian dollar of the 1990s also changed the relative price of labour and capital. At the time, there was a fair bit of excess labour in the economy, because of the structural adjustments that were taking place. The lower dollar raised the cost of machinery and equipment relative to labour.