it does not have an effect on real variables), it has profound effects on real variables in the short run. 2  Another reason is a reduction in low-productivity work in an economic environment where monetary policy is producing its intended effects.
Indeed, with inflation expectations well anchored, total and core inflation should return to the 2 per cent target in the first half of 2011 as the economy moves back to its production potential. Of course, global developments pose significant upside and downside risks to the inflation projection. The Bank judges that these risks are roughly balanced.