The Bank of Canada has underscored that there is nonetheless a fine balance to be struck here: while moving too slowly would allow more time for financial vulnerabilities to build, moving too quickly could have outsized effects, given the high level of household indebtedness.
There may be, in different situations, a case for taking longer to bring inflation back to target than the usual six to eight quarters.10 That was something we considered in late 2013. Inflation was running below target and the economy had excess capacity, which might have warranted an easing in policy.