When inflation and interest rates are low, as is the case now, small changes in inflation expectations or interest rate expectations can lead to repricing of risks which can be quite large. In turn, this repricing of risks can lead to elevated volatility in asset prices, as was witnessed during May-June 2006. III.
Experience has shown that the best way monetary policy can achieve this goal is by maintaining a low and stable inflation environment. Doing so supports a strong and inclusive labour market that provides every Canadian with opportunities for a good quality of life. Currently, the reopening of the global economy is associated with elevated inflation in Canada and abroad.