Together, these factors imply that the small amount of excess demand now in the economy will be eliminated by mid-2007. Core inflation is expected to move a bit above 2 per cent in the coming months but return to the 2 per cent target by the middle of 2007 and remain there through 2008.
The Governing Council also reiterated its readiness to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner.