Let me say a word about our forward guidance that we've put out, and how it works.
Let's just remember where we were a year ago. A year ago, the economy was basically going over a cliff. Inflation was extremely low; it was actually negative. Our biggest fear was deflation, which would have been very damaging. Against that background we used a number of extraordinary tools. One of them is exceptional forward guidance.
We've indicated that we will hold the policy rate at a quarter of a per cent until slack is absorbed. We take that commitment seriously, and it was done very deliberately to prevent a much worse crisis. As I said, we still have some way to go, but it is working.
What that means going forward is that, given that we're going to hold it at the effective lower bound until slack is absorbed, we probably will get some excess demand, because as we move from excess supply, we'll probably get a little excess demand. You can that in the forecast we've put out. With that you'll probably get inflation going a little over the 2% target.
We have a control band of 1% to 3% and we're prepared to use it. That's part of a flexible, inflation-targeting regime. As we get there it will be very important to assess pressures in labour markets and pressures on physical capacity of companies, and it will be very important to look at the information in inflation itself. If it's coming in above what we think it should be, that's an indication that maybe things are tighter than we thought.
On the other hand, if it's coming in a little less than we thought it would be, that's a suggestion that maybe there's a bit more room for the economy to grow without inflationary pressures, and those are the kinds of assessments we'll be making. I look forward to that day when we get to do those assessments, but that is still some ways off. We have to get there first.