And so today, I would like to do three things: • • •  first, illustrate and characterize this gap; second, explore some measurement and behavioural explanations of this disconnect between perception and reality; and third, examine the implications for monetary policy, including communications to different audiences.
Low and stable inflation promotes economic prosperity Economists define inflation as a sustained increase in the general price level of goods and services in an economy over a period of time. While this concept of inflation seems straightforward, measuring inflation accurately is difficult. The CPI inflation rate is designed to track how much the average Canadian household spends and how that changes over time.