##rs, will help lift aggregate demand. equally impressive and timely action has been undertaken by monetary authorities through aggressive cuts to policy interest rates ( see chart 1 ) these short - term rates are now close to zero – the lowest level that nominal interest rates can go. attempts to push nominal rates persistently below zero are bound to be ineffective, since investors always have the alternative of converting their securities into cash. indeed, the effective lower bound ( elb ) for policy interest rates, as i shall explain in a minute, is likely to lie somewhat above zero. this suggests that most major central banks have already reached the maximum dosage of their conventional monetary policy medicine. this doesn't mean, however, that central banks are out of ammunition. conventional monetary policy and the effective lower bound in more conventional times – that is, when banks and financial markets are fully operational – the process of monetary policy transmission follows a reasonably direct and well - understood path. the first step involves a careful monitoring and forecasting of economic activity and inflation. second, the central bank must decide whether more or less macroeconomic stimulus is needed. for many central banks, this is guided by an explicit ( or implicit ) inflation target, since keeping inflation low, stable, and predictable is generally accepted as the best contribution that a central bank can make to the economic well - being of its nation's citizens. 1 the value of having such a clear and credible target will be explored in more detail a little later in these remarks. the bank of canada was one of the first to adopt explicit targets and aims to keep inflation at 2 per cent. third, if action is necessary, the central bank will either lower or raise its target interest rate, depending on the circumstances. from there, the monetary impulse is transmitted to other financial instruments with longer maturities, including the interest rates charged by banks on loans. while few transactions are actually conducted at the target rate, the interest rates that they influence further out the yield curve do have a material effect on the borrowing and lending decisions of households and businesses. once the target interest rate approaches zero, conventional monetary policy has gone just about as far as it can go. nominal interest rates, as noted earlier, cannot fall below zero, and most central banks would aim to stop slightly above this level, leaving a small positive margin or buffer. pushing policy rates too low can lead to problems in financial markets and restrict the flow of credit at the very time central banks are trying to restore it. for these

returning to 2 per cent in the third quarter of 2011. total cpi inflation is projected to follow a very similar path and return to the 2 per cent target also in q3 of next year. • the main upside risks to inflation are associated with the possibility of a stronger than - anticipated global recovery and of canadian domestic demand that is more robust and has more momentum than projected. • on the downside, there is the risk that persistent strength of the canadian dollar could act as a significant further drag on growth and put additional downward pressure on inflation. another important downside risk is that the global recovery could be even more protracted than projected. • on tuesday, the bank reaffirmed its conditional commitment to maintain its target for the overnight rate at the effective lower bound of 1 / 4 per cent until the end of june 2010 in order to achieve the inflation target. • the bank retains considerable flexibility in its conduct of monetary policy at low interest rates, consistent with the framework outlined in the april 2009 mpr. with that, paul and i would be pleased to take your questions.