control as a means to better overall economic performance. interestingly, once a central bank has adopted an explicit inflation target, as we have, and is held to account for it, the move towards greater transparency is speeded up. for it quickly becomes apparent that monetary policy will be more successful in meeting the target if both the public and financial markets understand the factors affecting inflation as well as the central bank ’ s assessment of those factors and its likely response. here in canada, we found that, as we consistently met our targets, public expectations about future inflation changed - the more credible the bank ’ s commitment to the targets became, the more canadians formed their plans on the assumption that the future trend of inflation would stay inside the target range. over time, a credible commitment to inflation control also sets other positive developments in motion. as credibility rises, uncertainty about future inflation diminishes. interest rates are lower than otherwise and investment in machinery, equipment, and technology increases, leading to stronger economic growth in the longer run. but that is not all. as canadians become more confident that inflation will be controlled, they are less quick to react to unexpected disturbances that could affect inflation. this contributes to greater economic stability and gives the bank of canada a bit more time to assess the extent and persistence of such disturbances. greater public confidence thus gives the bank more latitude to explore the limits of the economy ’ s capacity to produce and to create jobs without setting off inflation pressures that undermine the sustainability of the economic expansion. transparency and accountability in monetary policy require effective communication. at the bank, we have undertaken a series of initiatives to improve our communications with the public. five years ago, we redesigned our annual report to make it a more reader - friendly yearly account of how we have managed the bank and how effectively we have carried out our main responsibilities. at that time, we also introduced a monetary policy report, which is published every six months - in may and november. this report describes our management of monetary policy and gives the bank ’ s assessment of recent economic information as well as our outlook for the economy and inflation. after the release of each monetary policy report, we meet with media as well as with business economists and financial analysts. in addition, i appear before a parliamentary committee to discuss the report ’ s contents. both of these initiatives are important parts of the accountability process. six months, however, has been proven to be rather a long time between monetary policy reports, especially for market participants and economists who follow

many to conclude that keeping inflation low, stable and predictable is the best contribution monetary policy can make to the economy. it sounds less ambitious than the preamble to the bank of canada act, but the results have been very powerful. nevertheless, the widespread belief that keeping inflation low and stable would keep the economy out of trouble proved to be misplaced. the global financial crisis laid bare the second important limitation of monetary policy : low inflation can still lead to a buildup of dangerous imbalances in the economy. in effect, prolonged economic and financial stability can lead to excessive risk - taking and rising leverage. regulatory complacency also played an important contributing role. imbalances can make the economy fragile. when a shock hits the economy, its effect can be amplified by these imbalances, and the central bank may have difficulty achieving its inflation target for some time. in other words, low and stable inflation may be necessary for sustainable economic growth, but it is not sufficient on its own. more on this later. the perils of low for long policy - makers, both monetary and fiscal, have worked extremely hard for more than a decade to nurse their economies back to health. by 2014, we appeared to be within a year of returning “ home ” — by which i mean the point where the economy is running at full capacity, with supply and demand in balance and inflation at target. when the economy is truly home, it can grow sustainably without policy stimulus. unfortunately, the economy hit a major setback late in 2014, when oil prices collapsed. the bank lowered its key policy interest rate twice in 2015, to a very stimulative level of 0. 5 per cent, to help the economy work through the shock of lower oil prices. the government also introduced new fiscal stimulus. over the next two to three years, the economy gradually made its way back home, absorbing excess capacity and seeing inflation return to target. in this context, the bank began withdrawing its extraordinary stimulus, raising interest rates by a total of 1. 25 percentage points, to 1. 75 per cent. but with that rate still lower than inflation, it is clear that monetary policy continues to deliver stimulus to the economy today. 2 / 6 bis central bankers'speeches indeed, monetary policy has been stimulating the economy for much longer than anyone expected when the crisis began back in 2008. and we have seen the natural results of leaving interest rates very low for a long time. for one thing, this