Upside risks include a faster-than-expected recovery in consumer and business confidence, and further improvements in Canada's terms of trade. Downside risks are largely external, such as a risk of setbacks in the ongoing repair of the global financial system, and more persistent weakness in foreign private demand.
All else being equal, a persistently strong Canadian dollar would also reduce real growth and delay the return of inflation to target. The Bank will assess the balance of risks to inflation in its upcoming MPR, which we will release two weeks from today.