We keep inflation in check by trying to have the economy operate at full capacity, with aggregate supply and demand in balance. In doing so, we help the adjustment process because resources that are released by sectors under pressure can be more readily absorbed by sectors that are expanding. We see clear evidence of this process happening right now in Canada.
Nevertheless, there is still considerable slack in a number of euro area countries which are burdened with high unemployment. Stock imbalances also remain in other areas, such as the level of NPLs in the euro area banking sector, or the large negative net international investment positions in countries that in the years prior to the crisis were running high current account deficits.