The Globe and Mail reports in its Thursday, April 30, edition that the Bank of Canada held its policy rate constant Wednesday. The Globe's guest columnists Jeremy Kronick and Steve Ambler write that the BOC kept its policy rate and highlighted risks to the Canadian economy. These uncertainties create both upward and downward pressure on inflation, making the job of the BOC all the more difficult. As a result, the BOC was wise to leave its policy rate unchanged. Monetary policy affects inflation through the output gap, which is the difference between actual GDP and potential GDP. Tight monetary policy reduces demand, decreases actual GDP, and narrows the output gap, putting downward pressure on inflation. Loose monetary policy has the opposite effect. Critical for the BOC in deciding whether to hike, cut or hold is a clear understanding of the gap's magnitude. A positive gap signals tight monetary policy is necessary if there are fears inflation might become de-anchored from its 2-per-cent target. A negative gap signals the opposite. Determining the output gap is challenging given today's situation. Tuesday's fiscal update introduced measures that may boost the economy, but the extent of that boost is still unclear.