BIS Review 170/2010  3    The most recent rates of core inflation were 1.8 per cent in Canada versus 0.6 per cent in the United States. It is not all good news. The weak links in the Canadian economy have been poor productivity growth and declining export competitiveness.
First, higher inflation was not always associated with higher output and employment. The Phillips curve was not only vertical in the long run, but was probably upward-sloping. Second, efforts to fine-tune the real economy were likely to end in failure. Optimism about our ability to forecast and about the level of full employment introduced a strong inflationary bias to fiscal and monetary policies.