The Bank of Canada has a clear inflation objective, and that is to keep the annual increase in the consumer price index as close as possible to 2 per cent. That objective, together with our transparent framework for how we go about achieving it, helps to anchor inflation expectations, and adds a significant amount of certainty to the economic and financial environment.
An important element of controlling inflation and promoting sustainable growth is keeping the economy operating in line with its production capacity. For the central bank, this means getting a good reading on this capacity, which we call the economy's potential output. Potential output is not directly measurable.