As you mentioned, the increase in inflation that we're seeing now is not being driven by an overheating economy and shortages of labour. It's being driven very clearly by the war in Iran, which has sharply increased oil prices. That's showing up at the pump.
We've indicated that we will look through the immediate impacts of higher oil prices on inflation. There's nothing we can do about that directly. The only way that gets resolved is if the source of the problem gets resolved, and that's certainly beyond our control. We will look through the initial impacts. As I said, we've held our policy rate unchanged in the last two decisions, even as the war had started. What we're focused on, though, and what we don't want to see, particularly if the price goes higher and stays high, is that there's a risk that those higher energy prices start to feed into other goods and services, and those feed into yet more goods and services. Pretty soon, a one-off increase in the price level starts to become ongoing increases in the price level, or generalized inflation.
Yes, I understand that higher interest rates are not going to be great for most Canadians, certainly if you have a mortgage or if you're renewing your mortgage, or if you're a small business or big business and you're borrowing, but the alternative is to let inflation get out of control and become entrenched. That hurts everybody even more. The interest rates are the instrument we have to control inflation.