So a proper assessment of the degree of monetary ease in the economy has to consider both our low interest rates and the relatively low Canadian dollar. Now, what about the perception that any move by the Bank of Canada to less-stimulative monetary conditions means “slamming on the brakes” for our economy? Let me stay with the automobile analogy for a moment.
To get the economy moving, the Bank has been pressing hard on the monetary accelerator. But once the economy picks up speed, just as with a car, you need to ease off gradually on the accelerator and steady your cruising speed at a safe level. If you press hard on the accelerator for too long, you will reach speeds that are unsafe.