In conjunction with other structural changes resulting from reform efforts, this should lead to a higher steady state output and employment level, and to the extent that these structural changes actually take place, monetary policy can and should accommodate this increase in potential output.
But, generally, either of two outcomes could emerge if Canada manages to return inflation to target sooner than our trading partners do. Neither outcome is bad. In fact, each has its own set of advantages. On the one hand, as I mentioned, lower Canadian prices could improve our competitiveness if exchange rates don’t adjust.