mark carney : 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 july 2010. * * * good morning. it is my pleasure to introduce to you tiff macklem, who assumed the post of senior deputy governor of the bank of canada on canada day. we are pleased to be here with you today to discuss the july monetary policy report, which the bank published this morning. the global economic recovery is proceeding but is not yet self - sustaining. a greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the bank ’ s outlook in april. the policy response to the european sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth. however, it is also expected to slow the global recovery over the projection horizon. global growth is now projected to average slightly less than 4 per cent through 2012. the u. s. economy continues to recover, but growth is projected to be slightly weaker than anticipated in april. this is owing to the fallout from the sovereign debt crisis in europe and a more protracted recovery in household demand. in canada, the economic recovery is unfolding largely as expected, and is supported by continued fiscal and monetary stimulus, higher terms of trade, improved labour markets, and household confidence, as well as the global recovery. the level of real gdp is now close to its pre - recession peak. the bank expects the pace of growth in canada to moderate to a slightly greater degree than it had expected in april. gdp is now projected to grow 3. 5 per cent in 2010, 2. 9 per cent in 2011, and 2. 2 per cent in 2012. the bank continues to expect consumer spending to slow to a pace more consistent with income growth. business fixed investment has been more subdued than expected and its level is still depressed. going forward, we expect it to increase to levels consistent with previous recoveries, driven by the need to expand capacity and to increase productivity in a more competitive international environment. inflation in canada has been broadly in line with the bank ’ s april projection. both total cpi and core inflation are expected to remain near 2 per cent throughout the projection period. the bank will look through the transitory effects on inflation of changes to provincial indirect taxes. the risks around this projection remain elevated and

productivity. as for society as a whole, pensions provide a couple of important benefits. first, no society wants to see large numbers of its senior citizens relying entirely on government transfers, although there is fairly universal agreement across most countries that it is desirable to have some degree of public income support for people in their old age. beyond that, however, a well - functioning pension system is an important source of the long - term risk capital that is essential to finance growth. mitigating risks – defined - contribution plans most of the challenges and risks i've mentioned can be mitigated, to a greater or lesser extent, through the pooling effect that a pension plan provides. of course, different kinds of pension plans deal with risks in different ways. first, let me briefly discuss defined - contribution plans and the way they deal with risks. a defined - contribution plan mitigates, at least partially, many of the challenges and risks i mentioned for individuals. for example, the costs of funds management and investment advice are pooled. further, pooling helps to mitigate the risk that individuals will not have saved enough to purchase an appropriate annuity. however, a defined - contribution plan leaves individuals completely exposed to market risk. the value of a member's contribution could fall sharply just before retirement, or an individual could retire during a period of abnormally low interest rates. defined - contribution plans reduce, but do not eliminate, risks for employers. 2 because of market risk, this type of plan can fall short of the goal of ensuring adequate retirement income for all employees. the retirement incomes of two people with identical work histories can differ greatly, if they retire at separate times when the prevailing market conditions are very different. finally, defined - contribution plans do significantly mitigate risks for society as a whole, but there may still be a less - than - optimal investment of the pools of contributions. i will come back to this point in a minute. in summary, defined - contribution plans can mitigate a number of risks to individuals, businesses, and society as a whole. however, appropriately structured defined - benefit plans can do better. mitigating risks – defined - benefit plans now let's turn to defined - benefit plans. i'll spend the balance of my remarks today discussing these plans and how they mitigate various risks. a properly structured defined - benefit plan mitigates all the risks for individuals that a defined - contribution plan does, for essentially the same reasons. but