3  Chart 1:  Potential output growth is less variable than actual output growth Annual data  % 6  4  2  0  -2  -4  Range of potential output growth  Output gap  Sources: Statistics Canada and Bank of Canada calculations, estimates and projections  Potential output growth  Real GDP growth  Last data plotted: 2021  So, a central challenge in pinning down potential output growth is disentangling the short-term fluctuations in GDP caused by demand shocks from long-term fluctuations that are due to the underlying forces that affect aggregate supply.ii Since the forces that determine aggregate supply tend to change slowly, we focus on trends when thinking about and measuring potential.
From a monetary policy perspective, the best contribution your central bank can make to helping the economy cope with external shocks is to ensure that inflation remains under control. Nothing is as important to investors, especially during turbulent times, as the assurance that comes from the protection that low and stable inflation provides for the value of money.