##r and in our economic progress report speeches. in the mpr, we now provide details on the most important risks to our projections. we spell out how we have seen these risks evolving and what we will watch so that we can judge their continuing evolution. of course, there will always be a desire for the bank to be more forthcoming about our own interest rate expectations, including by publishing a projected interest rate path. ironically, the case for doing so is usually based on economic models that are so simple they exclude most financial markets. this means that they cannot even consider the idea that forward guidance might suppress the signalling role of financial markets, which we consider of high value. 5 / 6 bis central bankers'speeches given the complex uncertainties we face today, market signals have never been more valuable to policy - makers. to continue to benefit from those signals, we must be honest and transparent about what we know and what we do not know. we are committed to explaining what issues we are looking at and how we are thinking about them. today, as we approach our next interest rate decision, we are working to incorporate in our projections the effects of the recently announced us steel and aluminum tariffs, along with retaliatory measures, both in canada and globally. we are also analyzing individual - level data to understand how the new lending guidelines in canada are affecting the housing market and mortgage renewals. we expect these issues to figure prominently in our upcoming deliberations. conclusion it is time for me to conclude. i hope that my talk about transparency has clarified our work at the bank. we realize the importance of transparency, along with accountability and credibility, in building understanding and trust among all our audiences. we have worked hard at being transparent, and these efforts have been recognized as world - leading among central banks. but we acknowledge that we have more work to do. we can be clearer in our communications with the general public. and we will be as clear as we can be with financial markets, always guided by what we know and by what we do not know. my bottom line is this : being transparent is not only the right way to operate in a modern democracy, it also helps us meet our inflation - control target and our commitment to a stronger, more resilient canadian economy. i would like to thank toni gravelle for his help in preparing this speech. 6 / 6 bis central bankers'speeches

. on the macroeconomic side, governments should continue to aim for sustainable fiscal policies, with budgets in rough balance or in small surplus. but i want to spend a few minutes speaking about monetary policy and the role of the bank of canada. the bank of canada's monetary policy aims to preserve a climate of low, stable, and predictable inflation. this can help with the adjustment process in several ways. such a climate minimizes the distortion of price signals that can lead to inappropriate investment choices. low and stable inflation allows firms to undertake long - term investments with greater certainty. but crucially, low inflation also reduces the risk premium demanded by investors. this means that nominal long - term interest rates are kept low, which supports the investment that helps with the adjustment process. in addition, the bank's monetary policy has a stabilizing function, which also facilitates adjustment. let me explain. we keep inflation in check by trying to have the economy operate at full capacity, with aggregate supply and demand in balance. in doing so, we help the adjustment process because resources that are released by sectors under pressure can be more readily absorbed by sectors that are expanding. we see clear evidence of this process happening right now in canada. let me now say a few words about how our flexible exchange rate fits into our monetary policy framework. there are some who have called on the bank to smooth out fluctuations in the canadian dollar, or to slow its ascent. but we have one monetary policy instrument - our influence over interest rates - so we can have only one target. canada has chosen low inflation as the target, because experience clearly shows that low inflation is the best contribution that monetary policy can make to economic health. we do not have a target for the canadian dollar. however, this does not mean that the bank does not care about the impact of movements in the exchange rate on the canadian economy. the truth is quite the opposite - the exchange rate plays an important role in our monetary policy deliberations. exchange rate movements tell us something about economic developments that may be having a direct impact on the demand for canadian goods and services. and the movements themselves have their own effect on aggregate demand, by changing relative prices and by shifting demand between domestic - and foreign - produced products. the challenge for the bank is to evaluate these movements, together with other data, and to set a course for monetary policy that works to keep demand and supply in balance and inflation low and stable. in making this evaluation, we try to