rise in canada and around the world. second, as i discussed, global commodity prices rose faster than anyone expected, partly in response to the strong economic recovery and more recently the war in ukraine. we had expected some persistence of these supply problems. but modelling and predicting the resolution of supply issues is extremely difficult, and these supply problems have turned out to be more persistent. all these unique, largely global, factors led to higher inflation than we expected. in april we once again revised our inflation projection higher. we incorporated into our base - case scenario part of the upside risk to inflation related to more persistent supply chain issues that we outlined in our january mpr. we said in april that we expect inflation to average almost 6 % in the first half of 2022 before easing to about 2½ % in the second half of 2023 and returning to the 2 % target in 2024. and the march cpi number was above what we were projecting and will likely lead us to further revise our near - term profile for inflation. the policy rate is going up that brings me to my final point today — the path of our policy rate. we are confronted with an economy that is showing clear signs of overheating, very tight labour markets and this perfect inflationary storm of global events and preference shifts. economic growth is displaying stronger momentum than we expected over the past few quarters. we ’ ve revised up expected growth in the first half of 2022 compared with what we had in january mpr. all of this means that our policy rate, at 1 %, is too stimulative, especially when inflation is running significantly above the top of our control range. we need our policy rate to be at more neutral levels to help cool demand growth and bring the economy into balance. that ’ s why we are taking actions to normalize our policy rate quickly and are prepared to be as forceful as needed. simply put, with demand running ahead of the economy ’ s capacity, we need higher interest rates to cool domestic inflation. and as we ’ ve said before, the economy can handle it. but here ’ s where i want to discuss some of the nuances of the future path of interest rates. economists are notorious for saying “ on the one hand this, but on the other hand that. ” and i ’ m about to live up to the stereotype. as we said in april, we could pause our interest rate increases when we get close to the neutral rate, which is a level

##ening here at home. inflation is broadening because the canadian economy is in excess demand. there aren ’ t enough goods and services to meet the demand we ’ re seeing as people enjoy a fully reopened economy. employers can ’ t find enough workers and they ’ re increasing wages to attract and retain staff. with households spending robustly, businesses are passing on higher input and labour costs by raising prices. higher interest rates will help slow demand and allow supply time to catch up. consumer spending will moderate as the pent - up demand from pandemic restrictions eases and the cost of borrowing increases. housing market activity is already cooling rapidly from unsustainably high levels during the pandemic. and slower global growth will reduce demand for our exports. taking all of this into account, we are forecasting annual growth in economic activity will be around 3½ % this year, 1¾ % next year and 2½ % in 2024. as global bottlenecks gradually resolve and tighter monetary policy works its way through the economy, inflation will start to come down. while we may see a few more months with cpi inflation around 8 %, we expect it to decline later this year, ease to about 3 % by the end of next year and return to the 2 % target by the end of 2024. this is the soft landing we are projecting. interest rate increases can cool demand and inflation without choking off growth or causing a surge in unemployment. some sectors will be more affected by interest rate increases than others, but the very tight labour market means there is room to reduce the number of job vacancies without having a big impact on overall employment. and with the prices of many of the commodities we export expected to remain elevated, the global forces slowing growth will not affect canada as much as many other countries. but the path to this soft landing has narrowed because elevated inflation is proving more persistent. and this requires stronger action now so consumers and businesses can be confident that inflation will return to its 2 % target. our decision today takes the policy interest rate to 2½ %. that puts it in the longrun neutral range that neither stimulates nor restricts growth. we estimate that range to be between 2 % and 3 %. we continue to expect that interest rates will need to rise further to cool demand and achieve the inflation target. how high our policy rate needs to go will depend on how the economy and inflation evolves. by front - loading interest rate increases now, we are trying