I highlighted two risks in particular: a potential buildup of inflation pressures in the United States that could spill over to Canada; and the possibility of a much stronger momentum of demand in this country from both domestic and foreign sources. Economic developments since November continue to point to these risks.
And they underline the need for the Bank to be vigilant and ready to act in a timely fashion to safeguard Canada’s low trend of inflation. For let us make no mistake: a resurgence of inflation would undermine our chances of a durable economic expansion. Of course, the challenge for monetary policy is to assess carefully just when action is needed.