activity, their contribution to growth will be limited by a still - weak level of foreign demand and ongoing competitiveness challenges, including the persistent strength of the canadian dollar. as a consequence, growth remains largely reliant on private domestic demand. business investment is expected to be an important source of growth going forward, reflecting highly favourable conditions and the competitive need to refocus, retool and retrain. momentum in household spending remains solid. however, in an environment of more modest growth in employment, wages and net worth, households ’ dependence on debt financing remains the biggest domestic risk. as the bank noted in its march decision, the profile for core and total cpi inflation is somewhat firmer than previously anticipated, reflecting reduced economic slack as well as higher oil prices. over the next few weeks, the bank will update its outlook for growth and inflation in canada to reflect these factors and other developments, such as recent federal and provincial budgets. as always, this analysis will inform our monetary policy decisions. the bank will take whatever action is appropriate to achieve the 2 per cent cpi inflation target over the medium term. this is our contribution to ensuring that canadians can save and invest with confidence. over the next few years, canadian businesses will also have to analyse and act. their decisions to refocus, retool and retrain will do much to determine how rapidly our prosperity grows in the decades ahead. for canada to grow in the future as it has in the past, businesses will need to draw on similar resourcefulness that the membership of the k - w chamber has demonstrated over the years. bis central bankers ’ speeches bis central bankers ’ speeches

ratio of change in the five - year government of canada bond yield to the total decline in the policy rate 0. 9 0. 8 0. 7 0. 6 0. 5 0. 4 0. 3 0. 2 0. 1 1995 – 96 2000 – 02 2007 – 09 2019 – 20 note : the five - year yield for the pandemic cycle peaked in december 2019, the month the first covid - 19 cases emerged globally. the decline in both the policy rate and the five - year rate is from their highest level to their lowest level within the easing period. source : bank of canada the pandemic was the first time the bank used qe and only our second time using extraordinary forward guidance. the higher movement of five - year rates relative to the policy rate during the pandemic suggests these exceptional policies were effective. focusing in on qe, there are various ways researchers can assess the impact of large - scale bond purchases on yields. a common method is to use event studies, which look at how much bond yields move at the time central bank purchases are announced. using this method, bank staff estimate the impact of qe to have been about 20 bps on 10 - year government bond yields. however, the impact may have been much larger. the same study finds that because there was some expectation the bank would do qe even before purchases were announced, 10year bond yields could have been as much as 80 bps higher without qe. 4 for context, we would need to cut the policy rate by a lot more than 20 bps or 80 bps for it to have a similar impact on 10 - year yields. this is because the effect of policy rate changes typically fades away after a couple of years. 4 for more, see azizova, c., j. witmer and x. zhang, “ assessing the impact of the bank of canada ’ s government bond purchases, ” bank of canada staff discussion paper no. 2024 - 5 ( june 2024 ). an earlier study looked at the impact of the initial announcement of the government bond purchase program. see arora, r., s. gungor, j. nesrallah, g. ouellet leblanc and j. witmer, “ the impact of the bank of canada ’ s government bond purchase program, ” bank of canada staff analytical note no. 2021 - 23 ( october 2021 ). let me explain why bond yields would have been higher without q