bankers ’ speeches • the outlook balances the many upside and downside risks to inflation. three of the most important emanate from the external environment, and include the risks of stronger u. s. private demand, a failure to contain the crisis in europe, and weaker growth in china and other emerging - market economies. • the most important domestic source of risk to the canadian economy remains the possibility of a disorderly unwinding of household sector imbalances. • against this backdrop, the bank today decided to maintain the target for the overnight rate at 1 per cent. • as long as there is significant slack in the canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate. over time, as the normalization of these conditions unfolds, a gradual normalization of policy interest rates can also be expected, consistent with achieving the 2 per cent inflation target. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches

are as important as those of labour markets for our shared prosperity. in response to these painful lessons, the bank of england has been bestowed with enormous new responsibilities by parliament. they now span monetary policy, macroprudential policy, and microprudential supervision. they include responsibility for the united kingdom ’ s bank notes ; its payments systems ; oversight of financial markets infrastructure and resolving failed institutions. to help fulfil its mission the bank has core roles in europe, at the g20 and at the financial stability board. in ch. 24 of keynes, j m ( 1936 ), the general theory of employment, interest and money, macmillan cambridge university press. bis central bankers ’ speeches having monetary, macroprudential, and microprudential policy under one roof makes gains from trade possible. it is our duty to exploit complementarities, synergies and economies of scope to maximise our impact by working together. to do so, we need research. and to some extent, research needs us. the need for research the way central banks have sought to achieve their objectives – the practice of central banking – has frequently moved ahead of the theory of central banking. theory, in turn, subsequently catches up, and enriches and refines practice. the history of central banking is replete with examples. tacit knowledge has often been more instrumental in determining policy outcomes than insights from formal research. sometimes this works, as in bagehot ’ s “ dictum ” ( to lend freely at a penalty rate against good montague norman ’ s “ never explain, never excuse ”. 2 research has meant that some modes of operation, like norman ’ s, have rightly fallen by the wayside. it has helped nuance others, like bagehot ’ s. and it guides us as to which practices to retain, reinforce and enhance, and which should be discarded. the practice of monetary policy in the great moderation is another example. it informed theorising and research on inflation targeting. and, in turn, through trial, error and refinement, research has helped inform policy with empirical insights and workhorse models. in the theoretical space, this process led to woodford ’ s dictum that in modern central banking very little else matters beyond expectations. 3 in contrast, the practice of central banking in a messy real world where people use various heuristics, including rational inattention, has shown the limitations of such logical extremes. research showed how