So, the economy is now judged to be operating further above its production potential than was earlier thought to be the case. Inflation in Canada has also been stronger than we anticipated in April. Inflation for services prices continues to run well above 2 per cent, and inflation for goods prices – particularly semi-durable goods – has been higher than anticipated.
Some of this strength may prove to be temporary. Nonetheless, there is an increased risk that future inflation will persist above the 2 per cent inflation target. The base-case projection in our April Report was developed using a number of assumptions, including an assumption that the Canadian dollar would continue to trade within a range of 86.5 to 89.5 cents U.S.