Corporate profits have been at high levels, and this has not only led to an increase in business fixed investment but also had positive effects on the household sector through a rise in household income.
The data since April have tipped the balance. The accumulation of evidence—across a range of economic indicators—suggests that excess demand in the Canadian economy is more persistent than we thought, and this increases the risk that the decline in inflation could stall. That’s why we decided to raise the policy rate.