We made this decision in light of the distance we have come in tightening policy, the uncertain lags in monetary policy, and the potential headwinds from credit tightening.
Suffice to say that for the Canadian data, this work has generally confirmed our faith in our model of inflation, in which inflation depends mainly on the degree of excess demand or excess supply in the economy, and this process operates with a lag. In short, we believe that we understand how Canada’s inflation rate has been evolving.