stephen s poloz : summary of the latest monetary policy report opening statement ( via video ) by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, toronto, ontario, 16 april 2014. * * * good morning. tiff and i are pleased to join you today by videoconference. as you know, we are in toronto to attend the funeral this afternoon of canada ’ s former finance minister, jim flaherty. before we discuss the monetary policy report, i ’ d like to say a few words about him. what set jim flaherty apart was that while he was a formidable finance minister, he was first and foremost an ordinary man. you immediately connected to him after just a few minutes, and it was immediately clear that he was there for canada, 100 per cent. that ’ s what he did all day, every day. and to everything that he did, he brought a solid dose of common sense. people found that attractive and helpful, and his gut instincts were usually right. a lot of his legacy is right there for us. i ’ ll miss him tremendously, and canada is the poorer without him. let me turn now to the mpr, which the bank published this morning. before we take your questions, allow me to note its highlights. • inflation in canada remains low. core inflation is expected to stay well below our 2 per cent target this year and it will take close to two years for it to return to the target. total cpi inflation is expected to move closer to the target in the coming quarters due to temporary factors. • let me take a moment to explain this inflation forecast. core inflation is expected to remain below target due to the effects of economic slack and heightened retail competition. we expect these effects to persist until early 2016. • however, total cpi inflation will move up this year, before core, in response to higher consumer energy prices, as well as the lower canadian dollar. • we expect total cpi inflation will remain fairly close to target throughout the projection period. that ’ s because in 2015 and into early 2016, as the upward pressure from energy prices dissipates, the downward pressure from retail competition should gradually fade and excess capacity will be falling. this will cause core inflation to make its way gradually up to 2 per cent, catching up to total cpi inflation from below. • the global economic expansion is expected to strengthen over the next three years as

bank of canada is formally committed to keeping it that way. at the same time, i most certainly agree that we should always be looking at our economic policies from the perspective of their likely impact on the growth of productivity. after all, productivity is what matters for a sound economic performance and for rising standards of living over time. currently, the low canadian dollar provides an opportunity for canadian businesses to expand their presence in foreign markets. but they must also continue to work hard to increase productivity and to ensure that they stay competitive as our currency regains strength. what about monetary policy – what is it doing to further productivity? the focus of canadian monetary policy is on domestic price stability. this means keeping inflation low and stable over time – currently within a target range of 1 % to 3 %. the bank aims to avoid both inflation and deflation. and if we are successful, we will have provided canadians with greater predictability, fewer cyclical fluctuations, and sustained low interest rates. i believe that a monetary policy that seeks to provide this kind of environment is the most conducive to productivity growth over time. concluding remarks to conclude, let me just say that canada cannot escape the uncertainties that have clouded the global economic outlook. the pace of economic expansion in canada is not as robust as it was a year ago. but our economy should continue to grow over the next year, supported by accommodative monetary conditions and sustained u. s. demand. – 6 – although it may be difficult to see while we are still battling the waves of global instability, the fact is that we are coping better this time around because our economy is in sounder shape. and this gives me reason to remain rather positive about our economic future. * * *