Mark Carney: Summary of the latest Monetary Policy Report
Opening statement by Mr Mark Carney, Governor of the Bank of Canada, at the press
conference following the release of the Monetary Policy Report, Ottawa, 22 April 2010.
* * *
Good Morning. I am pleased to be here with you today to discuss the April Monetary Policy
Report, which the Bank published this morning.
 Global economic growth has been somewhat stronger than projected, with
momentum in emerging-market economies increasing noticeably and moderate
recovery underway in most advanced economies. Global growth is now projected to
average slightly above 4 per cent a year through 2012.

In Canada, the economic recovery is proceeding somewhat more rapidly than
expected in January. It is supported by continued fiscal and monetary stimulus,
improved financial conditions, the rebound in global economic growth, more
favourable terms of trade, and increased business and household confidence.

This year should mark the turning point when the private sector takes over from the
public sector as the primary source of growth. GDP is now projected to grow by
3.7 per cent in 2010 before slowing gradually to 3.1 per cent in 2011 and 1.9 per
cent in 2012.

This profile reflects stronger near-term global growth, very strong housing activity in
Canada, and the Bank's assessment that policy stimulus resulted in more
expenditures being brought forward in late 2009 and early 2010 than expected.

At the same time, the persistent strength of the Canadian dollar, Canada's poor
relative productivity performance, and the low absolute level of U.S. demand will
continue to act as significant drags on economic activity in Canada.

The Bank estimates that GDP in the first quarter of 2010 was about 1 per cent below
its peak in the third quarter of 2008 and some 2 per cent below its potential. The
economy is expected to return to full capacity in the second quarter of 2011, one
quarter earlier than projected in January.

The outlook for inflation reflects the combined influences of stronger domestic
demand, slowing wage growth, and overall excess supply. Core inflation, which has
been somewhat firmer than projected in January, is expected to ease slightly in the
second quarter of 2010 as the effect of temporary factors dissipates, and to remain
near 2 per cent throughout the rest of the projection period.

Total CPI inflation is expected to be slightly higher than 2 per cent over the coming
year, before returning to the target in the second half of 2011.

Despite the firming of the global and Canadian recoveries, there are considerable
risks around the Bank's outlook.

There are two main upside risks to inflation. It is possible that the momentum in
household expenditures and residential investment could be greater than currently
expected. Internationally, a faster-than-expected global recovery could stimulate
external demand for Canadian exports and improve the terms of trade.
 On the downside, the global economic recovery could be more protracted than
currently projected. A second downside risk is that the combination of the persistent
strength of the Canadian dollar and Canada's poor relative productivity performance
could exert a larger-than-expected drag on growth and put additional downward
pressure on inflation.
 In response to the sharp, synchronous global recession, the Bank lowered its target
rate rapidly over the course of 2008 and early 2009 to its lowest possible level. In
addition, in April 2009, the Bank committed to hold it at that level, conditional on the
outlook for inflation.

This unconventional policy provided considerable additional stimulus during a period
of very weak economic conditions and major downside risks to the global and
Canadian economies.
 With recent improvements in the economic outlook, the need for such extraordinary
policy is now passing, and it is appropriate to begin to lessen the degree of
monetary stimulus. That is why on Tuesday, 20 April 2010, the Bank removed its
conditional commitment.

The extent and timing of any additional withdrawal of monetary stimulus will depend
on the outlook for economic activity and inflation, and will be consistent with
achieving the 2 per cent inflation target.
With that, I would be pleased to take your questions.