But despite this volatility, we continue to project that core inflation will be a bit above 1.5 per cent for the second half of 2004, before gradually moving up to the 2 per cent target in 2005. Looking forward, we will need to continue to reduce monetary stimulus to avoid a buildup of inflationary pressures and to contribute to sustainable, solid economic growth.
However, the pace of our actions will depend on our continuing assessment of the evolving prospects for pressures on capacity and inflation. In this context, there are several key factors that the Bank will be watching closely. As always, there is uncertainty about the exact size of the output gap.