Yes, I understand.
I think initially there was a lot going on in the economy at the time, a lot of very unique circumstances. It was very difficult for us to really forecast and even understand in detail what was going on in the economy at the time. The models that we typically use to forecast inflation don't account for completely shutting down our economy for months on end and then restarting it.
I think initially the central banks around the world, including the Bank of Canada, understood that the drivers of inflation were largely what we would characterize as supply-driven. There was a lack of supply in the economy. Supply chains were recovering from being shut down, and there were some global forces that were also affecting inflation at the time. The invasion of Ukraine was causing a spike in commodity prices.
Typically, those are things that central banks “look through”. We wouldn't necessarily react immediately to things like that, because you could raise rates and slow the economy, and typically things like supply shocks or commodity shocks recover quickly, and then you may have slowed your economy needlessly when these supply shocks recover.
I think initially the Bank of Canada, and central banks around the world, were viewing what was happening in the economy, and as the member said earlier, this was happening globally, not just in Canada. Those shocks persisted longer than we anticipated, and at the same time, the demand in the economy came back quite aggressively as we had that reopening, so it was a combination of those two things.
I would agree. I think the governor has said publicly, and most governors have said publicly, that in hindsight on whether we waited longer than we should have, perhaps we did. Those supply shocks took longer to repair than we anticipated, and demand surged back more quickly than we anticipated.