mr thiessen ’ s statement on the bank of canada ’ s monetary policy report opening statement of the governor of the bank of canada, mr gordon thiessen, before the standing committee on finance of the house of commons on 26 may 1999. it is always a pleasure to appear before your committee following the publication of our monetary policy report. we released our ninth report last wednesday. the bank of canada began publishing these reports on a semiannual basis four years ago, as part of our effort to increase the transparency and accountability of the bank ’ s conduct of monetary policy. the main focus of every monetary policy report is how well canada is doing in managing inflation. but controlling inflation is not an end in itself. the objective of monetary policy is to help create and maintain a monetary climate that favours good economic performance, an economy where growth and employment are strong and canadians feel prosperous. the bank feels strongly that the best thing that monetary policy can do to help long - term growth in the economy is to preserve low and stable inflation. indeed, i believe the low and stable inflation rate we have had in canada in recent years has helped us through some difficult times. however, i am also happy to report that the global financial system is much more stable than it was at the time of my last appearance before you six months ago. the shock from the financial crisis in southeast asia, which began almost two years ago, was compounded last august by russia ’ s default on its external debt. the turbulence that followed has now largely subsided and investor confidence is being restored. as a result, the outlook for the world economy has become more positive than it was last november. financial markets have steadied in southeast asia, and prospects are good for a gradual recovery there. in brazil the authorities have taken major steps to address their difficulties. overall, global financial markets now seem better able to assess risk. interest rate cuts by central banks in all major countries have helped restore investor confidence. most importantly for canada, the us economy has continued to outperform expectations with strong growth and, as yet, no definitive sign of inflation pressure. nonetheless, there is still a fair degree of uncertainty about the overall external environment, given the divergent performance of the major economies. japan is still in recession and europe has been slowing down. because of this, we are expecting only a slow recovery in world commodity prices this year. in canada, the recent driving force in our economy has been exports. the strong demand in

jarle bergo : monetary policy and cyclical developments speech by mr jarle bergo, deputy governor of norges bank ( central bank of norway ), at sparebanken sogn og fjordane, førde, 18 october 2004. the text below may differ slightly from the actual presentation. the address is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 22 september, inflation report 2 / 04 and on previous speeches. the references and the charts in pdf - format can also be found on the website of the norges bank. * * * price stability, in the sense of low and stable inflation, is the objective of monetary policy in a number of countries. historical experience from norway and other countries has shown that high inflation has resulted in unstable output and employment. in addition, a fall in the price level will often accompany a period of decline. the first inflation target was introduced in new zealand in 1990. canada followed in 1991, the uk in 1992, and sweden and australia in 1993. in norway, the government issued a regulation introducing an inflation target in 2001. monetary policy in euro area countries and switzerland is also aimed at price stability, even though this is not referred to as inflation targeting in these countries. inflation targeting has proved to be particularly appropriate in very open small and medium - sized economies. commodity exports play a particularly important role in several of the countries that were the first to introduce inflation targeting. current inflation is low, but our recent history shows that without a nominal anchor inflation was high and variable and that we did not achieve higher growth in exchange for inflation. an economic policy that fuels inflation does not generate higher economic growth. on the contrary, it paves the way for subsequent recession and unemployment. high and variable inflation usually accompanies instability in output and employment. but inflation should not be too low over time either. this is partly because the structure of the economy evolves over time. demand for labour with different qualifications changes. restructuring requires changes in real wages and relative wages. nominal wages do not readily fall. with some measure of inflation, real wages and relative wages can be changed without reducing nominal wages. some degree of inflation oils the economic machinery. in periods, it will be appropriate to stimulate the economy with low, or even negative, real interest rates. if inflation becomes entrenched at a very low level, the interest rate will be less effective as an instrument because it cannot be set