Among the financial market developments that we watch closely are movements in longer-term interest rates and the exchange rate. Changes in interest rates naturally lead to movements in the Canadian dollar. However, currencies can move for many other reasons, including external factors, and these movements can affect our inflation outlook, depending on their cause, size and persistence. Conclusion It is time to conclude.
The inverse relationship could also reflect the fact that countries with less aversion to inflation might be less likely to have independent central banks. In addition, there is no consistent evidence of a relationship between central bank independence and real economic activity nor consistent evidence that central bank independence lowers the cost of reducing inflation or increases the effectiveness of stabilisation policy.