This very favourable price performance suggests that our economy has not been pressing as hard against capacity as we had thought. It gives us some more room to explore where the limits of that capacity really are. And this should give businesses a greater opportunity to exploit their new equipment and technology to the fullest.
Nonetheless, we must not be lulled into thinking that the threat of inflation has disappeared. Given the strong momentum and high levels of activity in our economy, and given the time that it takes for monetary policy actions to affect output and prices, the Bank must remain vigilant.