s 1 to 3 % target range - by early next year. at the same time, if world crude oil prices stabilize, we expect that the rate of increase in the total cpi will gradually come down and eventually converge with our core measure of inflation. but, as i said before, there are a number of uncertainties attached to this projection. the most important uncertainties revolve around future developments in the us economy. will that economy slow to a more sustainable pace? or will there be another surprising spillover of us demand into our exports? right now, it looks as if the growth of spending by us households is moderating. what if the american economy does not slow fast enough to prevent a rise in us inflation? will that have a significant adverse effect on expectations of inflation in canada? this is where the bank ’ s commitment to keeping the trend of inflation within the target range really comes into play. our role is to reassure canadians, by seeing to it that inflation here remains low and stable even if us inflation rises. another major area of uncertainty has to do with our economy ’ s capacity to produce. as i said earlier, our remarkable inflation record to date suggests that there was probably still some excess capacity in the economy in the early part of this year. although our projection assumes that pressures on capacity will contribute to an increase in the underlying trend of inflation - from around 1½ % now to 2 % next year - there is, in fact, a significant margin of uncertainty around these numbers. it is possible that the investment boom we have witnessed in canada since 1996 will increase productivity growth and capacity more quickly than we are allowing for. there is a good deal of anecdotal evidence that some of the american experience ( burgeoning investments in technology leading to robust productivity gains ) is being replicated in canada. until recently, there had been little evidence of this in our official, economy - wide productivity statistics. but there was a significant gain in productivity in the data for the second quarter of this year that were released recently. of course, it remains to be seen whether this will continue. monetary policy response how has monetary policy responded to all this? because of the surprisingly strong momentum of demand in canada since mid - 1999, and because of the likelihood that this could lead to inflation pressures in the future, the bank of canada raised interest rates four times - by a total of 1¼ percentage points - between november 1999 and may 2000. these four interest rate increases followed similar actions

economies has been dampened in the wake of the financial crisis. since the recession, emerging - market economies have accounted for two - thirds of global economic growth – up from just one - third at the turn of the millennium. emerging market economies also account for one - half of the growth in global imports. compare this with the united states where the economy is now well below its pre - crisis path and is likely to remain so even once the economy recovers its cyclical losses2 ( chart 4 ). clearly, exporters need to refocus their efforts to the fast - growing economies. m. carney, “ exporting in a post - crisis world ” ( speech to the greater kitchener - waterloo chamber of commerce, waterloo, ontario, 2 april 2012 ). bis central bankers ’ speeches current outlook : where we are today the global economy continues to face significant challenges. in the major advanced economies, especially the united states and europe, deleveraging by households and financial institutions and fiscal consolidation continue to weigh on growth. in the united states, the protracted dislocation of the housing market has been a drag on the recovery, despite some recent improvement. the debt crisis in the euro area, which intensified late last year, triggered a recession there and has had negative spillovers to many other countries, including the united states. in emerging market economies such as china, growth is moderating from the rapid pace of recent years, as exports to europe have fallen off and domestic demand has also cooled. however, economic growth is expected to gain momentum over 2013 – 14, as exports to advanced economies recover. despite these challenges, the profile for global economic growth has improved since the beginning of this year. 3 in particular, economic conditions in the united states have improved, with employment gains and better consumer and business confidence. the euro area, however, is still in recession, and is projected to show only a modest recovery later this year, although the risks around this projection are high. overall, global economic growth is now projected to moderate in 2012 to 3. 2 per cent and to recover to 3. 4 per cent in 2013 and 3. 8 per cent in 2014. here in canada, economic momentum is slightly firmer than a few months ago. since canada ’ s economic growth has also turned out stronger than expected in recent quarters, we estimate that there is now less slack in the canadian economy than previously anticipated ( chart 5 ). the discussion in this section is based on the bank of