For example, the significant decline of stock prices starting in 2000 was not accompanied by a major market malfunctioning, and the resulting loss of equity wealth did not seem likely to have negative ramifications for the real economy that were so immediate and severe as to be considered a crisis.
Therefore, we faced a risk that our return to full capacity and stable 2 per cent inflation would be delayed significantly. Accordingly, in January we took out some insurance against that risk, in the form of a 25-basis-point reduction in the policy interest rate. Our cut led to lower rates across our entire yield curve and a lower Canadian dollar.