Editorial More on interest rates

In what I have just said I have aimed to make clear why the Bank of Canada has been seeking in recent years to limit the pace of monetary and credit expansion — to bring it into line with the conceivable expansion of the underlying economy. Given the strength of spending, this policy of aiming to hold money and credit to a relatively moderate pace of advance has certainly meant upward pressure on short-term interest rates. They are now roughly 4 1/2 percentage points higher than in the first half of 1987. However difficult this is to accept in some quarters, bringing inflation under control is necessary to place economic expansion on a solid footing.

The only sure way to lower interest rates is to bring inflation down in a convincing manner, and this needs a firm anti-inflationary policy.

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