stephen s poloz : release of the monetary policy report opening statement by mr stephen s poloz, governor of the bank of canada, at the press conference following the release of the monetary policy report, ottawa, ontario, 15 april 2015. * * * good morning. carolyn and i are happy to be here to answer your questions about today ’ s interest rate announcement and our latest monetary policy report ( mpr ). let me begin with a few remarks around the issues that were most important to the governing council ’ s deliberations. i ’ ll start with the global context. the plunge in oil prices was due mostly to strong supply growth, but a softening in demand growth also contributed. a wide range of other commodity prices have declined further this year, also suggesting a softer world economy. in this context, we have seen many central banks ease policy this year, ourselves included. this widespread easing, coupled with the positive implications of lower energy prices for world growth, leads us to the conclusion that the global economy will pick up through the year. increased economic divergence is prompting divergent monetary policies as well, and is delivering more exchange - rate volatility and, on net, more strength in the u. s. dollar. turning to canada, as we stated in the january mpr, although lower oil prices would have both upside and downside effects on canada, the net impact would be negative. the negative effects would be immediate and seemed quite certain, whereas the positive effects would be more gradual and less certain. therefore, we faced a risk that our return to full capacity and stable 2 per cent inflation would be delayed significantly. accordingly, in january we took out some insurance against that risk, in the form of a 25 - basis - point reduction in the policy interest rate. our cut led to lower rates across our entire yield curve and a lower canadian dollar. meanwhile, oil prices stabilized and recovered to levels around our january forecast assumptions. and, as we monitored the data, we saw that some of the effects of lower oil prices were already being felt during the fourth quarter of 2014. the updated forecast in today ’ s mpr suggests that the economy saw no growth in the first quarter. i want to emphasize that policy does not hinge on decimal points – we always know we are dealing with a range of possible outcomes. interpretation of the recent data is complicated by the slowdown in the u. s. in the same quarter, which no doubt was partly due to severe

, and some additional one - time factors. core inflation is running at about 2 per cent, but it is also being boosted by exchange - rate effects and a couple of other one - time factors. because monetary policy takes up to two years to have its full effect on inflation, responding to every fluctuation in prices would be counter - productive. therefore, we generally look through inflation variations that, in our judgement, will prove temporary. these judgements constitute a very important part of our deliberations. presently, we are looking through the effects of the drop in oil prices, the effects of the recent depreciation of the canadian dollar, and the one - time effects of fluctuations in meat and telecommunications prices. this is why we refer to “ underlying inflation ”, which estimates and excludes what we judge to be temporary factors, and is driven mainly by the changes in the degree of excess capacity in the economy. in our projection, total inflation, core inflation and underlying inflation all converge on the same level once temporary factors have dissipated. meanwhile, the issue of financial stability risks remains front - and - centre in our deliberations. these risks are evolving in line with our expectations. the level of indebtedness, as measured by the debt - to - disposable income ratio, continues to rise. it is likely to rise further as the decline in gross national income, due to the halving of oil prices, works its way through the system. on the surface, lower interest rates would be expected to promote more borrowing, which would increase this vulnerability. however, in the near term, lower borrowing rates will actually mitigate this risk, by reducing payments for mortgage holders and giving us more economic growth and employment gains. we believe that the best contribution the bank can make to easing financial stability risks through time is to help the economy return to full capacity and stable inflation sooner, rather than later. with that, carolyn and i would be happy to take your questions. bis central bankers ’ speeches