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 April 2012.
* * *
Good morning. Tiff and I are pleased to be here with you today to discuss the April Monetary
Policy Report, which the Bank published this morning.

The profile for global economic growth has improved since the Bank released its
January MPR. Europe is expected to emerge slowly from recession in the second
half of 2012, although the risks around this outlook remain high.

The profile for U.S. growth is slightly stronger. This reflects the balance of somewhat
improved labour markets, financial conditions and confidence on the one hand, and
emerging fiscal consolidation and ongoing household deleveraging on the other.

Economic activity in emerging-market economies is expected to moderate to a
stillrobust pace over the projection horizon, supported by an easing of macroeconomic
policies.

Commodity prices remain elevated owing to improved global economic prospects,
supply disruptions and geopolitical risks. In particular, the international price of oil
has risen further and is now considerably higher than that received by Canadian
producers. If sustained, these oil price developments could dampen the
improvement in economic momentum.
 Overall, economic momentum in Canada is slightly firmer than the Bank had
expected in January. The external headwinds facing Canada have abated
somewhat, with the U.S. recovery more resilient and financial conditions more
supportive than previously anticipated.

As a result, business and household confidence are improving faster than forecast.
The Bank projects that private domestic demand will account for almost all of
Canada's economic growth over the projection horizon.

Household spending is expected to remain high relative to GDP as households add
to their debt burden, which remains the biggest domestic risk. Business investment
is projected to remain robust, reflecting solid balance sheets, very favourable credit
conditions, continuing strong terms of trade and heightened competitive pressures.

The contribution of government spending to growth is expected to be quite modest
over the projection horizon, in line with recent federal and provincial budgets. The
recovery in net exports is likely to remain weak in light of modest external demand
and ongoing competitiveness challenges, including the persistent strength of the
Canadian dollar.

The Bank projects that the economy will grow by 2.4 per cent in both 2012 and 2013
before moderating to 2.2 per cent in 2014. The degree of economic slack has been
somewhat smaller than anticipated, and the economy is now expected to return to
full capacity in the first half of 2013.

As a result of this reduced slack and higher gasoline prices, the profile for inflation is
expected to be somewhat firmer. After moderating this quarter, both total and core
inflation are expected to be around 2 per cent over the balance of the projection
horizon as the economy reaches its production potential, the growth of labour
compensation remains moderate, and inflation expectations stay well-anchored.

Despite recent improvements to the outlook for the global and Canadian economies,
risks remain elevated.

The three main upside risks to inflation in Canada relate to the possibility of
higherthan-expected oil prices, stronger-than-expected growth in the U.S. economy and
stronger momentum in Canadian household spending.

The two main downside risks to inflation in Canada relate to a reintensification of
sovereign debt and banking concerns in Europe, and the possibility that growth in
Canadian household spending could be weaker than projected.

Overall, the Bank judges that the risks to the inflation outlook in Canada are roughly
balanced over the projection period.

Reflecting all of these factors, the Bank yesterday maintained the target for the
overnight rate at 1 per cent. In light of the reduced slack in the economy and firmer
underlying inflation, some modest withdrawal of the present considerable monetary
policy stimulus may become appropriate, consistent with achieving the 2 per cent
inflation target over the medium term. The timing and degree of any such withdrawal
will be weighed carefully against domestic and global economic developments.
With that, Tiff and I would be pleased to take your questions.