2  BIS Review 13/2002  When demand is too strong, pushing the economy against its capacity limits, and there is a risk that future inflation will move appreciably above the target midpoint, the Bank will raise interest rates to cool off the economy. But this works also in the other direction.
When demand is weak, and future inflationary pressures are likely to ease, as was the case in 2001, the Bank will lower interest rates to stimulate the economy, absorb economic slack, and return inflation to the target midpoint. Let me stress here that the midpoint of our inflation target range is a target, not a cap.