rates unchanged and gathering more information to confirm the need to raise the policy rate. on balance, our assessment was that the cost of delaying action was larger than the benefit of waiting. elevated inflation is a burden on canadians, especially for the most vulnerable. we are also acutely aware that higher rates are making life more difficult for many canadians. and we know many canadians are asking : is the bank done raising interest rates, or will rates need to go higher still to relieve price pressures? the short answer is we will be taking each decision based on the information available at the time. 2 / 3 bis - central bankers'speeches what we can say is that monetary policy is working, and we know it will take more time for the full effects of past interest rate increases to work their way through the economy. with the increases in our policy rate in june and july, our outlook has inflation going gradually back to the 2 % target. but several things need to happen for inflation to continue easing. and we are particularly concerned about two upside risks to the outlook. first, we have been surprised by the persistence of excess demand and underlying inflation in canada and globally. we know that higher rates are having an impact, but how big their impact will be is uncertain. second, with the downward momentum in inflation waning and our forecast suggesting inflation will be around 3 % for the next year, we are concerned that the progress to price stability could stall, and inflation could even rise again if there are upside surprises. as i said, we are trying to balance the risks of over - and under - tightening. if new information suggests we need to do more, we are prepared to increase our policy rate further. but we don't want to do more than we have to. these decisions will be guided by our assessment of incoming data and the outlook for inflation. we need to see demand growth slow, wage pressures moderate and corporate pricing behaviour normalize. we will also need to see near - term inflation expectations and measures of core inflation come down further. let me conclude. the substantial drop in inflation over the past year is welcome news for all canadians. but monetary policy still has work to do - our job is not done until inflation is centred on our 2 % target. that is the level that helps the economy grow sustainably, restores competitive forces in the economy and gives canadians the price stability they need to budget and invest with confidence. with that summary, the senior deputy governor and i would be pleased to

securities - lending transactions. resolution a key component of the framework to achieve the resolution of large financial institutions without disrupting the financial system will be new “ bail - in ” debt and preferred - share instruments, which can be converted to common equity to absorb losses should the institution come under stress. 17 these instruments will be issued in large amounts and will have equity - like characteristics that pension funds may find attractive. shadow banking the shadow banking reforms can be viewed through two lenses : ( i ) financial market activities, particularly, repos, securities lending and securitization ; and ( ii ) less regulated financial institutions, such as money market funds, finance companies, hedge funds and managed - asset funds. because the sector is so heterogeneous, broad regulatory principles, rather than explicit reforms, have been developed that jurisdictions can apply to mitigate systemic risk – namely, to reduce procyclical behaviour and the likelihood of runs. these principles focus on reducing four sources of systemic risk : excess leverage ; undue liquidity and maturity transformation ; imperfect credit risk transfer due to incentive problems ; and a lack of transparency. it is important to stress that pension funds, while a type of managed asset fund, are not normally considered to be a source of systemic risk, despite providing non - bank financial intermediation, because these four sources of systemic risk are generally not present. nonetheless, pension funds will be affected by these shadow banking requirements to the extent that they engage in these activities or interact with these institutions. in particular, certain repo and securities - lending transactions will be subject to minimum haircuts to reduce procyclicality. central counterparties for repos and over - the - counter derivatives for repo and derivatives transactions, central counterparties reduce common counterparty exposures and systemic risk. we are encouraging some of the largest and most active pension funds in the canadian repo market to become direct clearing members of the canadian derivatives clearing service ( cdcs ), the central counterparty ( ccp ) owned by tmx group. the goal is to allow the large pension funds to participate directly in cdcs in a way that permits risk to be managed without requiring them to be subject to mutualized losssharing arrangements. less - active pension funds should become indirect clearers through a dealer to realize these benefits. such participation will greatly enhance the resilience of the repo market. similarly, pension funds should clear interest rate swaps through a bank that is a clearing member of