. investment outside the oil and gas sector is still expected to expand, nonetheless. businesses across canada tell us they plan to invest to increase competitiveness or to meet demand for their products. here ’ s the bottom line : when we take into account the impact on the global economy and commodity prices, trade conflicts and uncertainty are projected to reduce the level of canadian gdp by as much as 2 percent by the end of 2021. staff did some excellent work to inform our discussion, and you can see the results in box 2 of the mpr. they analyzed two scenarios that can be thought of as extremes : an unfavourable scenario in which trade conflicts escalate significantly, and a favourable scenario in which they are resolved. they held fiscal and monetary policy unchanged so that the economic effects would be more visible. the results are clear. the impact on growth, both globally and in canada, is much larger in the unfavourable scenario than in the favourable one. that underscores how much we all have to lose if the trade war escalates. as for inflation, it actually rises in the unfavourable scenario, even as the economy weakens. that ’ s because a full - blown trade war would affect supply. trade patterns and global value chains would be severely disrupted. this would lower productivity and reduce economic potential. it would threaten our living standards. at the same time, slower global growth in this scenario reduces commodity prices and leads to a sharp decline in the canadian dollar. while a lower currency would help contain the decline in exports, it would also put strong and persistent upward pressure on prices, as would the direct effects of the tariffs. it ’ s clear that monetary policy could not simultaneously buffer the impact on growth and keep inflation in check. central banks in advanced economies have not faced this type of trade off since the 1970s. of course, during our deliberations governing council also discussed the bank ’ s ultimate mission — inflation control. our core inflation measures have averaged close to 2 percent in recent quarters. total inflation will likely dip in the upcoming months due to the dynamics of gasoline prices and some other temporary factors. it is expected to return sustainably to target by around mid - 2020 as slack in the economy is absorbed and these temporary effects wane. let me wrap this up. the canadian economy is returning to potential growth. however, the outlook is clouded by persistent trade tensions. taken together, the degree of accommodation being provided by the current policy interest rate remains

appropriate. as governing council continues to monitor incoming data, we will pay particular attention to developments in the energy sector and the impact of trade conflicts on the prospects for canadian growth and inflation. 2 / 3 bis central bankers'speeches finally, i would like to say a few words about deputy governor lynn patterson, who will retire from the bank of canada next week. her contribution over the last six years to the bank, and to canada, has been exceptional, in matters as diverse as financial markets, payments, and monetary policy. she will be a hard act to follow. with that, governor poloz and i will now take your questions. 3 / 3 bis central bankers'speeches