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, 18 January 2012.
* * *
Good morning. Tiff and I are pleased to be here with you today to discuss the January
Monetary Policy Report, which the Bank published this morning.
 The outlook for the global economy has deteriorated and uncertainty has increased
since the Bank released its October MPR. The sovereign debt crisis in Europe has
intensified, conditions in international financial markets have tightened, and risk
aversion has risen. The recession in Europe is now expected to be deeper and
longer than previously anticipated.
 The Bank continues to assume that European authorities will implement sufficient
measures to contain the crisis, although this assumption is clearly subject to
downside risks.
 In the United States, the rebound in real GDP during the second half of 2011 was
stronger than anticipated. However, the Bank expects the recovery will proceed at a
more modest pace going forward, owing to ongoing household deleveraging, fiscal
consolidation and the spillovers from Europe.
Chinese growth is decelerating, as expected, toward a more sustainable pace.

 Prices for most commodities are expected to remain relatively elevated, although at
levels below those anticipated in October.
 The Bank's overall outlook for the Canadian economy is little changed from October.
While there was more momentum than anticipated in the second half of 2011, the
pace of growth going forward is expected to be more modest than previously
envisaged, largely due to the external environment.
 Household spending is now projected to grow at a steady pace through 2013.
Reflecting an upwardly-revised profile for residential investment, household
expenditures are now expected to remain high relative to GDP over the projection
horizon and the ratio of household debt to income is projected to rise further.
 While dampened somewhat by the external environment, business investment is
expected to grow at a solid pace. Net exports are expected to contribute little to
growth, reflecting moderate foreign demand and ongoing competitiveness
challenges, including the persistent strength of the Canadian dollar.
 The Bank estimates that the Canadian economy grew by 2.4 per cent in 2011 and
projects that it will grow by 2.0 per cent in 2012 and 2.8 per cent in 2013. While the
economy appears to be operating with less slack than previously assumed, given
the more modest growth profile, it is only anticipated to return to full capacity by the
third quarter of 2013.
 The dynamics for inflation are similar to those anticipated in October, although its
profile is marginally firmer. Both total and core inflation are expected to moderate in
2012 before reaching 2 per cent by the third quarter of 2013, as excess supply is
slowly absorbed, labour compensation grows modestly and inflation expectations
remain well-anchored.
 Several significant upside and downside risks are present in the inflation outlook for
Canada.
 The three main upside risks to inflation in Canada relate to the possibility of
stronger-than-expected inflationary pressures in the global economy,
stronger-thanexpected growth in the U.S. economy and stronger momentum in Canadian
household spending.
 The two main downside risks to inflation in Canada relate to sovereign debt and
banking concerns in Europe and the possibility that growth in household spending
could be weaker than projected.
 Overall, the Bank judges that these risks are roughly balanced over the projection
horizon.
 Reflecting all of these factors, the Bank yesterday maintained the target for the
overnight rate at 1 per cent. With the target interest rate near historic lows and the
financial system functioning well, there is considerable monetary policy stimulus in
Canada. The Bank will continue to monitor carefully economic and financial
developments in the Canadian and global economies, together with the evolution of
risks, and set monetary policy consistent with achieving the 2 per cent inflation
target over the medium term.
With that, Tiff and I would be pleased to take your questions.