households have had some income growth during these past five years, and these households may have grown accustomed to higher income levels. they may face an adjustment as their debt - service ratio rises once again, with consequences for their consumption spending. of course, this issue is most important for highly indebted households. we also know that the jump in payments will be greatest for those who took out mortgages when interest rates were at their lowest levels, in 2015 and 2016, so the mortgage renewal process is likely to weigh on the economy more in 2020 and 2021. all that being said, governing council concluded that the economy should be resilient to higher interest rates, provided that labour income continues to grow. the biggest issue on the table was trade tensions. as discussed before, uncertainty around the future of the north american free trade agreement has caused some companies to delay investment spending or to move their investments to the united states. this channel was identified and captured in our projection some time ago. the recent imposition by the us government of actual tariffs on canadian exports has made the situation more concrete. in the projections we are presenting today, we have added more negative judgment to our business investment forecast in recognition of this. we have also incorporated the effects of the us tariffs on steel and aluminum, and the various countermeasures implemented around the world. box 2 1 / 2 bis central bankers'speeches in the mpr gives a flavour of the complex effects such actions will have on the economy. let me summarize briefly. a us company importing canadian steel must now pay a 25 per cent tariff. they may instead buy steel made in the united states or in some other country. or, if no obvious substitutes are available, they may just pay the higher price. or, the canadian company may offer to reduce its price in order to absorb some of the tariff ’ s impact. or, it may look to other markets to sell its products. the response of companies will depend on how long they think the tariffs might be in place — for example, it appears that if nafta is successfully renegotiated, those tariffs would no longer be in effect. the point is, the outcome depends on individual reactions, which depend on the circumstances. and then there are countermeasures. canada has imposed a 25 per cent tariff on steel imported from the united states. this would seem to level the playing field, but many of the same complexities enter the analysis. all things considered, our

it is about trade, tax or the regulatory environment. we already factored in some of the effects of that uncertainty in our april outlook. until we get more information, it will be difficult to gauge the impact of any proposed policy changes more precisely. this will likely remain an important uncertainty in our projection, but life goes on and decisions must be made in the meantime. our judgment on the appropriate stance of monetary policy will continue to be based on the outlook for inflation and on the full range of risks — both upside and downside — to that outlook. an important aspect of our inflation assessment is that the economic drag from lower oil prices is now largely behind us. and the 50 basis point reduction in our policy rate in 2015 has facilitated this adjustment. as growth continues and, ideally, broadens further, governing council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required. conclusion time to wrap up. there are still risks to the canadian economic outlook. that said, when you look at the economy from different perspectives, there is reason to be encouraged. growth has been robust in recent quarters. as we celebrate canada ’ s 150th birthday and the strength that comes from the diversity of its people, we are seeing the benefits of its economic diversity as well. the strengthening economic activity in regions and sectors that rely on energy is working to diversify the sources of growth across the country. and, while there is still room for improvement in the labour market, stronger growth is translating into job gains across a wider range of regions and sectors. at present, there is significant monetary policy stimulus in the system. as we work toward our interest rate decision on 12 july, we will be focusing on the data and talking to many people like you to get a better sense of what is happening on the ground. one thing that remains clear is the bank ’ s commitment to achieving its inflation target so that canadians can make their financial decisions with more confidence. 1 s. s. poloz, “ riding the commodity cycle : resources and the canadian economy ” ( speech to calgary economic development, calgary, alberta, 21 september 2015 ). 2 t. chernis, c. cheung and g. velasco. “ a three - frequency dynamic factor model for nowcasting canadian provincial gdp growth. ” bank of canada staff discussion paper no. 2017 – 8 ( june 2017 ). 7 / 8 bis central bankers'speeches 3 the goods sector includes oil and gas, mining and manufacturing,