We believe the economy has become more sensitive to higher interest rates, given the accumulation of household debt, but we are not sure how much. And we cannot know to what extent the NAFTA negotiations and global trade policy uncertainty are slowing business investment decisions. In the face of such uncertainties, we cannot operate monetary policy mechanically.
Rather, policy becomes a matter of risk management. We must assess carefully the upside and downside risks to the outlook for inflation, and decide how best to manage and balance those risks. Today, we continue to judge that higher interest rates will be warranted to achieve our inflation target.