growth track. trends we continue to expect a soft landing for the housing market and canada ’ s household debtto - income ratio to stabilize. nevertheless, the imbalances in the housing sector remain elevated and would pose a significant risk should economic conditions deteriorate. we are observing, anecdotally at least, an increased awareness of this risk. consumers are showing responsibility ; for example, homebuyers who opt to buy less house than they qualify for so they don ’ t find themselves overextended if interest rates rise. banks, as well, are underwriting loans more carefully, ensuring that people can service their debts if rates go up. so, while the risk could be significant, we are comfortable that it is not outsized. to sum up, the bank continues to see a gradual strengthening in the fundamental drivers of growth and inflation in canada. but this view depends largely on the projected upturn in exports and investment. there is a growing consensus that when we do get home, interest rates will still be lower than we were accustomed to in the past – both because of our shifting demographics and bis central bankers ’ speeches because, after such a long period at such unusually low levels, interest rates won ’ t need to move as much to have the same impact on the economy. with underlying inflation expected to remain below target for some time, the downside risks to inflation are important, as are the risks associated with household imbalances. the bank judges that the balance of these risks remains within the zone for which the current stance of monetary policy is appropriate and, as you know, we decided on 16 april to maintain the target for the overnight rate at 1 per cent. the timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks. conclusion before tiff and i respond to your questions, i would like to take just a moment to say a few words about the man sitting next to me. tiff ’ s contributions at the bank started long ago as a new recruit with a fresh master ’ s degree in hand. his contributions throughout his career have been significant. at the bank, we will miss him for his intellect and management skills. but we will also miss a great friend to many, myself included. we can rest assured that tiff ’ s contributions to the financial welfare of canada will continue as the dean of the rotman school of business, where he will be busy ensuring that the next generation of economists

to be slightly weaker, reflecting more subdued u. s. activity. bis central bankers ’ speeches overall, the bank projects the economy will expand by 2. 8 per cent in 2011, 2. 6 per cent in 2012, and 2. 1 per cent in 2013, returning to capacity in the middle of 2012. in the near term, total cpi inflation is expected to remain above 3 per cent, largely reflecting temporary factors such as significantly higher food and energy prices. it is expected to return to the 2 per cent target by the middle of 2012 as the temporary factors unwind, excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers, and inflation expectations remain well - anchored. core inflation is slightly firmer than anticipated, owing to temporary factors and to more persistent strength in the prices of some services. core inflation is now expected to remain around 2 per cent over the projection horizon. although the global outlook remains broadly unchanged, global risks have intensified, most notably in europe. the three main upside risks to inflation in canada relate to the possibility of higher - than - projected commodity prices and global inflation, stronger momentum in canadian household spending, and the possibility that there is less excess capacity in the canadian economy. the three main downside risks to inflation in canada relate to sovereign debt concerns in europe, headwinds from the persistent strength of the canadian dollar, and the possibility that growth in canadian household spending could be weaker than projected. overall, the bank judges that the risks to the inflation outlook in canada are roughly balanced over the projection horizon. reflecting all of these factors, the bank yesterday maintained the target for the overnight rate at 1 per cent. to the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target. such reduction would need to be carefully considered. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches