While they are more difficult to describe, their defining feature is that they do not reflect current changes in demand for our goods and services. It's important for us at the Bank to try to distinguish between exchange rate movements that reflect changes in demand for our goods and services and those that do not.
That's because these movements have different implications for aggregate demand and, hence, for monetary policy. This is a complicated issue, all the more so because both types of currency movement sometimes occur at the same time. So I want to spend some time talking about these two different types of exchange rate movement.