inflation, let me take a step back to look at the larger, international picture. as i mentioned a moment ago, canadians have become increasingly aware of price pressures, but this is, in fact, a global phenomenon. indeed, sharp increases in inflation have been reported in both advanced and emerging - market economies in recent months. it is true that world prices of oil, natural gas, many minerals, and food products have eased in the past few weeks. nevertheless, earlier dramatic increases in the prices of these same commodities accounted for sharp increases in inflation. in many cases, these have been some of the highest rates of inflation observed in the past 10 to 15 years. it is important to note that inflation performance varies widely across countries. in some cases, excessively loose monetary policies, implemented in an attempt to push economic growth higher than the sustainable limits of a country's production capacity, have also been an important contributing factor. in many countries, the recent surge in inflation has been coupled with a dramatic slowing in real economic growth, rekindling memories of the 1970s and concerns over stagflation – the uncomfortable combination of high inflation and slow or negative growth. most observers believe it would be too great a stretch to draw parallels between the current experience and that of the 1970s. still, recent developments do pose a serious policy challenge for central bankers, especially when combined with the dislocation and difficulties evident in global financial markets. conventional monetary policy reactions might not be appropriate in circumstances where we see a combination of rising inflation, slowing gdp growth, and concerns about financial instability. rising inflation, for example, often leads to calls for tighter monetary policy. yet, would that be wise if a slowing economy and other developments were expected to reverse these inflation pressures in the future? slower economic activity often leads to calls for easier monetary policy. but would that reaction be wise if inflation pressures were believed to be rising rather than receding? around the world, monetary authorities are determined not to repeat the policy errors of the 1970s, when overly stimulative measures led to double - digit inflation and rising inflation expectations. we all seek reliable indicators with which to gauge how serious and longlasting the current inflation pressures might be. this kind of information can materially affect the stance of monetary policy. this illustrates why monetary policy - makers must gather and weigh as much information as possible in their decision making – and why inflation research is so important. defining and measuring total and core cpi inflation before i describe some of our

cpix because of its demonstrated superiority on both empirical and theoretical grounds. its advantage was confirmed by additional research when our inflation targets were renewed again in 2006, and it has recently been retested as part of a more comprehensive international study looking at a range of measures of total and core inflation. clearly, this process of refinement and retesting never ends. this is because it is crucial that we be able to determine the most effective indicators of underlying inflation and how these might be further refined and improved upon over time. so the next question becomes : how can we distinguish between good and bad measures? an effective core measure must have four key properties. first, and most obviously, a core measure should be less volatile than total inflation. second, it must be unbiased. by this we mean that the core inflation measure must track long - run movements in the total cpi very closely. third, a good core measure must also be a reliable predictor of future trend movements in the total cpi. fourth, a good core measure must be easy to understand and to explain to the public. when all four requirements are considered together, cpix has been shown to be as good as, or better than, all of the alternative measures that the bank might use. other measures may outperform cpix when they are judged on just one or two of these four criteria. cpiw, for example, which is calculated using the reweighting method, can give slightly better predictions of the total cpi and bears a somewhat tighter relationship to the long - run trends in the total cpi. these differences are very minor, however, and are offset by other considerations such as ease of understanding. for this reason, cpix is still the bank's preferred core measure. nevertheless, given the demonstrated strengths of cpiw and one or two other trend measures, the bank continues to monitor a set of indicators rather than relying on any single one. popular misconceptions about core inflation our choice of cpix as an operational guide for monetary policy has, at times, been a source of controversy and has led to several popular misconceptions. journalists and other interested observers frequently question the use of cpix and other measures of trend inflation as operational guides. they argue that such measures give an overly sanguine picture of true inflation, especially during episodes of sharply rising food and energy prices. critics say that cpix inflation is frequently lower than total cpi inflation because, they claim, the bank has stripped