The Canadian economy was operating even further above its production potential than estimated in July, which was putting upward pressure on inflation. Developments in financial markets had led to some tightening of credit conditions for Canadian borrowers, however, which would temper the growth in domestic demand. And the U.S. economic outlook had also weakened.
This, together with a higher assumed level for the Canadian dollar, suggested that there would be more drag from net exports in 2008 and 2009 than previously expected. Given these developments, we held our policy rate steady through September and October.