We expect core inflation to average just over 1.5 per cent for the rest of 2003, and to fall to just above 1 per cent in early 2004, as the effects of earlier increases in auto insurance premiums dissipate. Core inflation should return to 2 per cent by mid-2005, as economic slack is taken up.
Total CPI inflation will continue to be importantly affected by swings in the price of crude oil. If prices ease to $ 27 per barrel next year, total CPI inflation would likely fall below core inflation in 2004. However, there are significant risks to this economic outlook.