Good afternoon. It's great to be here in London at the Ivey Business School.
I always enjoy having the opportunity to speak with future business leaders. And I think, in our increasingly complex world, it is more important than ever to bridge the gap between the C-suite boardroom and the work we do at the Bank of Canada. With that in mind, I'm going to talk about a concept that is useful in many domains, including both business and economics: separating the signal from the noise.
Let me put it in business terms first. Imagine you're listening to a company's earnings call. You need to be able to separate the noise-the CEO talking about "optimizing impact" or "leveraging synergies"-from the signal-say, a sustained decline in revenues.
Central bankers do exactly this with inflation. We need to strip out the noise so that monetary policy can respond to the signal. Today, I am going to explain how and why we do this. But first, let's go over some basics.
Canada has a 2% target for consumer price index (CPI) inflation, or total inflation. This target helps households, businesses and financial markets know what to expect with prices. Our job at the Bank is to keep inflation close to that target. We do this by adjusting our policy interest rate.
