in the global economy has also surprised on the upside. so, we do not yet see the well - balanced base that would give us assurance that growth is on a solid footing. this brings me to the second issue. given the performance of exports and investment, the uncertainty regarding the tax and trade policies of the us administration again factored prominently in our discussions. the bank of canada is quite used to dealing with uncertainty, and we were very deliberate in choosing how to incorporate it into our projections and policy decision. in terms of potential us tax measures, we judged in january that there was enough information available to make some initial assumptions. there are now signs that suggest implementation will be delayed, and so we have updated these assumptions. we took a different approach to uncertainty about potential us trade policies. we now have a 1 / 2 bis central bankers'speeches better sense than in january of the extremely wide range of possibilities : they include a borderadjustment tax, targeted tariffs on some products and countries, non - tariff barriers and even broader multilateral trade measures. we do not know which of these will be enacted ; their timing is uncertain ; and each would affect the global economy and canada through a different, complex set of channels. take a look at box 1 of the report for a discussion of this. although it is fair to say that the possible outcomes are almost certainly negative for canada, we cannot reliably model them at this stage. instead, we have incorporated an extra degree of caution in our forecast for exports relative to our january forecast, including the potential implications of the softwood lumber dispute. we have also been cautious with our forecast of business investment. while businesses are becoming more confident, they remain wary. when we talk with companies, many tell us that planned increases in investment are modest, or related to maintenance, rather than to expansion. overall, we project economic growth in canada to slow from an annual pace of 3. 8 per cent in the first quarter to just over 2 per cent for the remainder of the year. we project growth of just under 2 per cent in 2018 and 2019. given the stronger profile of economic activity relative to january, governing council was very focused on the third issue : how much excess capacity remains in the economy. we use a couple of different methods to gauge the amount of excess capacity, which gives us a range of estimates of excess supply. evidence from inflation data is also consistent with material excess capacity remaining. although a number of temporary factors are keeping headline

mark carney : reforming the global financial system remarks by mr mark carney, governor of the bank of canada, at a rendez - vous avec l ’ autorite des marches financiers, montreal, quebec, 26 october 2009. * * * it is a pleasure to be here at this year ’ s rendez - vous avec l ’ autorite des marches financiers ( amf ). after briefly reviewing the current macrofinancial environment, i intend to concentrate on the g - 20 reform agenda. the financial crisis has cost tens of millions of jobs and trillions of dollars in foregone output. its aftershocks will persist for years. to prevent an even more severe outcome, monetary and fiscal policies have been stretched to their very limits. in this context, it would be a mistake to underestimate the determination of g - 20 leaders to reshape the financial services industry. last month in pittsburgh, the leaders of the g - 20 endorsed a comprehensive agenda, whose implementation is just beginning. as i will highlight during my remarks, canada intends to use its presidency of the g - 7 next year to advance some of the most important priorities. current outlook recent indicators point to the start of a global recovery. economic and financial developments have been somewhat more favourable than the bank had expected in july, although significant fragilities remain. in canada, as expected, a recovery in economic activity is also under way, following three consecutive quarters of sharp contraction. this resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. however, heightened volatility and persistent strength in the canadian dollar are working to slow growth and subdue inflation pressures. the current strength in the dollar is expected, over time, to more than fully offset the favourable developments since july. given all these factors, the bank now projects that, relative to our july monetary policy report, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. we now expect growth to average slightly lower over the balance of the projection period. the bank projects that the canadian economy will contract by 2. 4 per cent this year and then grow by 3. 0 per cent in 2010 and 3. 3 per cent in 2011. this projected recovery will be somewhat more modest than the average of previous cycles. total cpi inflation declined to a trough of - 0.