The Bank of Canada held its policy rate steady at 2.75 per cent on Wednesday.Adrian Wyld/The Canadian Press

Jeremy Kronick is vice-president and director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute, where Steve Ambler, a professor of economics at Université du Québec à Montréal, is the David Dodge Chair in Monetary Policy.

On Wednesday, the Bank of Canada held its policy rate steady at 2.75 per cent. Although headline inflation has been at or below target for 9 of the last 11 months, there are some signs of underlying upward pressure on inflation. Also, Canada’s economic performance has been more resilient than expected, so the decision made sense. However, some cracks are showing, and the next few months will be telling.

We have argued in these pages on many occasions that the data the Bank of Canada receives often tell contradictory stories. The Bank must also account for the fact that its policies affect the economy only after long and variable lags.

This lagged effect is........

© The Globe and Mail