slower than that in british columbia, contributing to relatively stronger wage growth. interestingly, we also see the impact of labour supply adjustment in regional housing markets. how the labour supply adjusts in the face of rising demand conditions is an issue we are watching closely because it affects the evolution of our economic capacity. for example, given revisions to past investment and our anticipation that trend labour input will rise over the next three years, we increased our estimate of potential output growth in april to 1. 8 per cent. still, with the uncertainty inherent in measuring potential output, we carefully monitor our measures of underlying inflation to ensure they are consistent with our assessment of economic slack. as such, core measures of inflation remain essentially at 2 per cent, consistent with the economy operating at close to capacity. however, higher crude oil prices, on average, relative to our april forecast are expected to lead to a higher headline inflation rate in the near term. monetary policy typically looks through transitory fluctuations such as this, as we did last year when inflation was held down by other temporary factors. 4 see d. brouillette, m. dockrill, h. lao and l. savoie - chabot, “ bending the curves : wages and inflation, ” bank of canada staff analytical note no. 2018 - 15 ( may 2018 ). yesterday ’ s decision this brings me to our decision yesterday to leave our policy rate unchanged at 1. 25 per cent. as we have emphasized several times in the past, our policy decisions remain guided by incoming data, since they inform our outlook for growth and inflation. as such, in reaching yesterday ’ s decision, we carefully weighed the information we have received since our april mpr. let me take a few moments to summarize the developments that factored the most into our deliberations. first, i want to reiterate that the economy is evolving largely as expected, with inflation roughly at our 2 per cent target and economic activity near potential. given this context, we began by acknowledging the better - than - expected tenor of many recent economic indicators. as i outlined earlier, manufacturing and investment activity has been solid, and exports are proving to be stronger than we expected in april, helped by increased energy exports. another positive sign is the 11 per cent increase in nominal service exports in the first quarter, which reinforces our view that services will continue to lead export growth, as they have in recent years. similarly, higher prices, on average, for canadian oil

0 per cent a little more than three years ago. 19 the proceedings of the workshop, as well as speeches and other material related to the 2021 renewal and previous renewals, are available at toward 2021 - reviewing the monetary policy framework. - 10 - 2011 renewal and, in the end, we concluded that its benefits did not clearly outweigh the costs and risks of making the shift. but we also said that our assessment of plt could change. chart 3 : household debt has risen to elevated levels in canada and the g7 aggregate household debt as a percentage of gdp, quarterly data % 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 canada g7, excluding canada ( ppp gdp weighted ) last observation : 2017q2 source : bank for international settlements chart 4 : high levels of g7 public debt are a legacy of post - crisis fiscal stimulus general government gross debt as a percentage of gdp, annual data % canada source : international monetary fund via haver analytics g7, excluding canada ( ppp gdp weighted ) last observation : 2017 - 11 - chart 5 : real interest rates have declined since 1990 long - term real government bond yields in advanced economies, quarterly data % - 3 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 canada g7, excluding canada ( ppp gdp weighted ) sources : bloomberg and consensus economics last observation : 2017q4 what about our tools? in recent years, central banks have used various tools to ease monetary conditions and stimulate demand when their policy rate was at the effective lower bound. 20 for example, in 2009 we issued a conditional commitment to keep the key policy rate unchanged for a year, as long as the outlook for inflation didn ’ t change. other central banks also used such explicit forward guidance as well as large - scale asset purchases, typically of government securities, for this purpose. further research is needed to examine the effectiveness of these tools and how best to use them. finally, the experience during the crisis, when both aggressive monetary and fiscal stimulus were used, highlighted the benefits of simultaneous policy action. although monetary policy is normally seen as the most effective countercyclical policy tool because it can respond flexibly and nimbly to adverse shocks, it may need support from other policies more frequently in the future. indeed, studies have shown that when rates are at the effective lower bound, countercyclical fiscal policies, such as automatic stabilizers, and discretionary policies, such as infrastructure spending,