The Globe and Mail reports in its Thursday, Oct. 24, edition that the inflation rate is weakening, with a recent drop in headline inflation nearly a full percentage point below the target rate. The Globe's guest columnists Jeremy Kronick and Steve Ambler write that consequently, markets expected the Bank of Canada to cut its overnight rate target by 50 basis points, with speculation of a larger 75-point cut. However, with inflation decreasing faster than the policy rate, the real monetary policy has become tighter. Following the recent cut to 4.25 per cent when inflation was at 2.5 per cent (resulting in a real policy rate of 1.75 per cent), the current inflation rate of 1.6 per cent and an overnight rate of 3.75 per cent now give a real policy rate of 2.15 per cent. Below-target inflation combined with Canada's relatively weak economy suggests that the overnight rate target should already be at least at the "neutral rate," the sweet spot that neither restricts nor stimulates economic growth. The BOC currently estimates the neutral rate to be in the range of 2.25 per cent to 3.25 per cent. On balance, with the overnight rate where it is, inflation is more likely to remain low or even decrease.