. paying close attention to signs that inflation is moving away from our target - in either direction - promotes timely action. this is how we keep the economy operating near its full capacity and thus keep inflation low, stable, and predictable. the second point i want to stress is that having an inflation target as an anchor is very helpful in terms of the bank's accountability. if inflation persistently deviates from the target, we are committed to explaining the reasons why, what we will do to return it to target, and how long we expect the process to take. the third point is that any central bank that runs an independent monetary policy and targets inflation must allow its currency to float. it is simply not possible for a central bank to successfully control both the domestic and external values of its currency at the same time. we have only one instrument - our policy interest rate - so we can have only one target. thus, with inflation as our target, we naturally operate with a floating currency. canada's experience under inflation targeting now, let me quickly review our record with inflation targeting. as we look at inflation and economic growth in canada since 1991, it is quite clear that the benefits we had hoped would come from inflation targeting have, in fact, materialized. we expected inflation to become more stable - and it did so, sooner than we had anticipated. since settling on the 2 per cent target for inflation at the end of 1995, actual inflation has averaged very close to 2 per cent. and it has remained within the 1 to 3 per cent target range, with only rare exceptions. we expected our credibility to increase and inflation expectations to become well anchored - and this has also happened. we also thought that inflation targeting would help the economy to avoid the exaggerated " boom - bust " cycles of previous decades - and it has. the business cycle is still with us, but economic volatility has diminished. by keeping inflation close to the target, monetary policy has helped to keep the economy operating near its potential. finally, and very importantly, our transparent framework has allowed markets and analysts to better predict how we will react to different economic outcomes. within the bank, too, focusing on inflation has brought increased discipline and clarity to our monetary policy decision process. canada was the second country after new zealand to adopt explicit inflation targets. but over the past decade and a half, about 20 other central banks have also adopted this framework. some, like the central banks of the united kingdom and sweden, are from advanced

( forthcoming ). 5 bank of canada, “ bank of canada response to detailed review report. ” - 7as a public institution, the bank has a responsibility to operate in a transparent way. this new summary will provide an additional window into the views that were shared during our deliberations and will shed light on governing council ’ s consensus - building process. by providing more insights into our monetary policy decisions, we can help canadians understand what we are doing and why. this will enhance our accountability. beyond that, we know that the more people understand what we do and why, the more they trust us. and that makes monetary policy work better. being open is always important, but it is especially crucial in uncertain times — and as we work to bring inflation back to our 2 % target. conclusion it ’ s time for me to conclude. cpi inflation remained at 6. 9 % in october, with many of the goods and services canadians regularly buy showing large price increases. measures of core inflation are around 5 %. three - month rates of change have come down, providing some early indications that as demand slows, price pressures may be losing momentum. but the economy remains in excess demand, inflation is still too high and broadly based, and short - term inflation expectations remain elevated. that is why we made the decision we did yesterday. looking ahead, governing council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target. we will continue to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. we know this is a very challenging time for canadians. increased borrowing costs in the near term will deliver the benefits of low inflation, but only with a delay. it will take some time, but we will get there. it ’ s what canadians want and it ’ s what they expect from us. inflation that is low and predictable helps money keep its value and makes it easier for everyone to plan how they spend. this helps the economy expand in a sustainable way, generating higher incomes and new jobs. we are resolute in our commitment to achieving the 2 % inflation target and restoring price stability for canadians. yesterday ’ s decision moves us another step closer to this goal.