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.

thing is very clear to me. and that is the importance of credible domestic macroeconomic policies. without a sound fiscal policy and without a strong explicit commitment to inflation control, exchange markets will not have full confidence in the underlying value of the currency. and the ability of a flexible exchange rate to respond to shocks and to facilitate the interest rate movements needed for an independent monetary policy will be seriously compromised. this in the end says it all. no exchange rate system is going to bail you out of bad economic policies. and that is equally true of a floating exchange rate system, as it is of the alternatives - a fixed exchange rate or indeed a monetary union, even if that monetary union is with the world ’ s largest, strongest economy. in today ’ s rapidly changing, increasingly open world economy, there is an even greater need for flexibility than before. i believe that a flexible exchange rate regime continues to serve canada well in dealing with the challenges of this new economic reality. the current economic situation in canada let me finally say a few words about the current economic situation in canada. the canadian economy had a good year in 1999. our export industries benefited from the strong us economy. and with global economic conditions generally improved, primary commodity prices rebounded. the resulting gains in incomes and employment in canada led to higher levels of domestic spending. recently revised statistics now show stronger economic growth in canada during 1999 than previously estimated. and we continue to see strong momentum in our economy so far this year. indeed, by some calculations, we could be operating at full capacity. however, as has been the case in the united states for some time, canada has also recently experienced an increased level of investment in machinery, equipment, and technology. this should lead to improvements in productivity and in our economy ’ s production capacity. but we cannot be sure by how much. in light of this uncertainty, the bank of canada has been concerned about our economy picking up too much speed. there is a risk that we could hit the capacity ceiling too hard, causing supply bottlenecks and shortages that could lead to an ongoing increase in inflation. to reduce this risk, the bank of canada increased its bank rate twice, in november and february, following similar rate hikes by the us federal reserve. the latest data indicate that the external demand for canadian output, especially from the united states, is stronger than previously expected. under these conditions, it is essential for the central bank to be vigilant. moreover, in view of the