We aim to achieve the target by adjusting our policy rate, which directly influences interest rates for household and corporate borrowing. Doing so helps align demand for domestically produced goods and services with the economy’s capacity to supply them.
If aggregate demand is expected to exceed or fall short of the economy’s potential output, we typically raise or lower the policy interest rate to close the gap and keep inflation on target. As I mentioned earlier, the other central pillar of our monetary policy framework is a flexible, market-determined exchange rate.