  The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2 per cent by the end of 2012, as excess supply in the economy is gradually absorbed and inflation expectations remain well-anchored.   Important risks remain around this outlook.
The three main upside risks to the inflation outlook are higher commodity prices, a stronger-than-anticipated recovery in the U.S. economy, and the possibility of greater-than-projected momentum in the Canadian household sector.   These upside risks are balanced by three downside risks relating to Canada’s international competitiveness, global growth prospects, and the possibility of a more pronounced correction in the Canadian housing market.