And with slack now absorbed, the momentum in demand means that monetary policy has a clear role to play in getting inflation back to our target. Against this backdrop, yesterday the Governing Council took the first step on the path to higher interest rates, raising our policy rate by 25 basis points to half a percent.
This takes our policy rate off its effective lower bound for the first time since the end of March of 2020—almost two years. We will also be considering when to end the reinvestment phase of our large-scale asset purchases and allow our holdings of Government of Canada bonds to begin to shrink.