and businesses that we saw during the years of high inflation. how does this u. s. experience relate to canada? can we also look forward to an improvement in the longer - term performance of our economy? unfortunately, it is not possible to make that judgement in advance, given the complexity of the factors affecting economic performance. how rapid growth can be and still be sustainable, and how low our unemployment rate will go, will ultimately depend on the flexibility, efficiency, and productivity of canadian enterprises. i am referring here to the effective use of new technology ; the skills, training, and adaptability of our labour force ; our ability to control costs ; and the initiative and ability of canadian businesses to find and develop new and expanded foreign markets for their products. the contribution that monetary policy can make towards realizing this potential is to ensure that the pace of economic expansion remains sustainable. this essentially means encouraging monetary conditions that will allow the economy to test the limits of its capacity to expand, but without setting off inflation and the costly boom and bust cycles of the past two decades. as in the united states, the problem in canada is that there is considerable uncertainty regarding the level of economic activity that can be accommodated by our capacity to produce and how rapidly this capacity will expand over time. this is where the bank of canada ’ s inflation - control target should prove useful as we try to steer the economy along a sustainable growth path. that target is to hold inflation inside a range of 1 to 3 per cent. one of the advantages of such an explicit target is that it provides a ready measure of the state of the economy by comparing the actual trend of inflation against the target range. if the trend of inflation looks as though it will be pushing through the top of the target range, this implies that demand in the economy has been unsustainably strong, and monetary conditions must be tightened. but if inflation is persistently lower than past history and the existing levels of demand would suggest, and it is tending to press the bottom of the range, chances are that there is more room for the economy to expand than previously thought, and monetary conditions can be easier. however, if the bank of canada is going to respond to such signals, we must ensure that our inflation - control strategy is a credible one. it is by conducting monetary policy in a prudent manner during the economic upswing that the bank can provide canadians with assurance that inflation will remain under control when the economy begins to operate at levels that push against

##lfsson, d. li and l. r. raymond, “ generative ai at work. ” national bureau of economic research working paper no. 31161 ( april 2023 ). 4 s. peng, e. kalliamvakou, p. cihon and m. demirer, “ the impact of ai on developer productivity : evidence from github copilot, ” arxiv : 2302. 06590 ( february 2023 ). boost total factor productivity ( tfp ) by 9 % over the next decade. 5 a similar sustained improvement in tfp in canada would raise the average income per - person by roughly $ 4, 000 a year. this productivity boost is not just from automating tasks. as workers in lower productivity jobs are replaced by ai, they are freed up to fill other, more productive jobs in the economy. and new products and services emerge. these latter two effects provide most of the positive impact on productivity. 6 however, more pessimistic estimates suggest that ai might have only a modest impact on productivity. 7 these assessments take the view that fewer tasks can be effectively automated. ai could also create negative outcomes, such as amplifying internet addiction and enabling malicious actors. these adverse effects could substantially decrease the net positive impact of ai. as we look at the effects of ai on the broader economy, we also need to ask if this technology will be transformative enough to significantly boost productivity growth. or will ai simply be the latest innovation in a chain of innovations — like the invention of the sewing machine or the evolution of telecommunications — to keep productivity rising at its historical pace. this matters a lot because productivity growth plays a key role in determining how fast the economy can expand without sparking inflation. so what is actually happening? the infrastructure needed to make ai broadly available is being built quickly. ai platforms are sprouting up, and it is getting easier for businesses — large and small — to access the technology. but we are still looking for the new products and services — and the new business models — that will transform efficiency and productivity. prices and inflation ai adoption — and its full effect on productivity — will play out over many years. in the long run, we can expect ai to boost productivity. higher productivity allows for higher wages and more spending without pushing up inflation. but what about in the short run? already, strong investment in ai technologies is boosting demand in the economy. the run - up