A drop of that magnitude in the prices of some of Canada’s major exports is bound to have a significant effect on our standard of living. To look at the past 25 years in isolation, however, tends to magnify the extent of the decline and leaves one with an exaggerated sense of the associated economic consequences.
The NBU’s forecast scenario envisages that the key policy rate will be cut further, to 8% as of the end of 2021, provided that inflation steadily declines to its 5% target. As before, the largest decrease in the key policy rate is expected to take place in 2020, along with inflation returning to its target range and inflation expectations improving.