And if the economy evolves in line with the SEP median path, the federal funds rate will likely approach the point at which normalization can be considered well under way before too long, when it will be appropriate to adjust balance sheet policy.
For example, our average CAD of around 4.5 per cent of GDP during the two year period 2011–13 was far in excess of our estimated sustainable level of around 2.5 per cent of GDP. Hence, we were more vulnerable to external shocks. Since then, our CAD has improved to 1.7 per cent of GDP in 2013–14 imparting greater resilience to our external sector.