Over time, we have learned that the best way to fulfill this mandate is to keep inflation low, stable, and predictable. Specifically, that means we aim to keep the annual rate of inflation, as measured by the consumer price index, at 2 per cent. To keep inflation on target, we aim for a balance between total demand and total supply in the economy.
By maintaining low and stable inflation, our monetary policy helps to keep the economy operating at full capacity and promotes greater stability in economic output. This is crucial in helping the economy to adjust to changing economic circumstances. Now, what does all of this have to do with the exchange rate?