Thank you, Chair.
I'm going to answer the second part first and then ask Mr. Macklem to answer the question on the bank capital.
To be absolutely clear—and I'm glad you raised the question—the bank does not target core inflation. The bank's target is for total CPI inflation, which includes gasoline and all food prices. I hope that's absolutely clear.
We have a target of 2% total CPI inflation because that's the representative basket of what Canadians consume. That's what Canadian households have to go out and spend. Of course it would be folly to suggest that Canadians don't put gas in their cars, or eat, or any of these things. We have to achieve—and we have achieved over the target's lifetime, including over the course of the last five years—2% total CPI inflation through tough and easy times.
What we do use with core inflation, or the difference between core and total CPI, is that we take out the eight most volatile items from total CPI. What core inflation is useful for—it's reported by Stats Canada, and I referenced this in my opening remarks—along with a number of other measures, is as an operational guide for where total CPI inflation is going to be.
Take the example of gas prices. They spike up because of conflicts in the Middle East, supply constraints in the United States, and other factors. They spike up. They're at a high level. We're aware they're at an elevated level. But unless they continue to increase, it's not additional inflation. We have to take into account what's happened to gas prices in terms of Canadian incomes and activity. The better guide of where inflation's going to be one year out, or one and a half years out, tends to be measures like core inflation and other measures, such as mean standard deviation and weighted means, all of which we report.
Just to be clear, we do not target that and we would not recommend that.