The high levels of public and private debt are also a source of concern due to the risk of activation of “debt-deflation mechanisms”. 4 Even the fact that the decrease in prices was partly associated with a favourable supply shock – the fall in oil prices − was no cause for relief.
We at the Bank continue to judge that the risks to our inflation projection are roughly balanced, although there is now a slight tilt to the upside. Last Tuesday, the Bank left its key policy rate unchanged at 4 1/4 per cent.