Our simulations suggest that commodity exports could decline from the 2014 level of 50 per cent to roughly 40 per cent of total exports by 2020.21 At the same time, the depreciation of the dollar (Chart 11) has helped the adjustment process by boosting demand for Canadian non-commodity exports and some domestically produced import-competing substitutes (Chart 15).
Hence, every attempt to fine-tune the economy bears the risk of policy errors with the corresponding negative effects on price stability. In my view, and that’s my second point, the more recent research on data uncertainty supports the principle of a cautious monetary policy approach (“steady as she goes policy”).