challenges. chief among them is the conduct of monetary policy during a period of profound adjustment during which deflation, inflation and financial stability risks could all threaten. the bank of canada believes flexible inflation targeting provides a robust framework for all seasons, and we will use its full potential to deliver price stability and to enhance the economic welfare of canadians. a general understanding that monetary policy will be employed to counteract the buildup of such risks and imbalances is likely to enhance the stabilizing impact of this approach. bis central bankers ’ speeches

and the recent strength in quebec and british columbia normalizes. these dynamics were built into our october projection. on the federal side, the government ’ s fiscal plans are pending. the slowing of growth in canada ’ s economy has been concentrated in goodsproducing industries, which were more heavily affected by the trade conflict and by lower commodity prices. the service sector — which now accounts for about 70 percent of the economy — has continued to show solid growth for some time. our overall assessment is that the canadian economy is near capacity. however, this masks significant regional differences. oil - producing regions continue to go through a painful adjustment to lower oil prices and transportation capacity constraints, and the labour market in alberta has been weak. meanwhile, some other provinces are seeing strong growth in employment and wages. finally, inflation remains broadly on target, with measures of core inflation holding steady around 2 percent. total consumer price index inflation was 1. 9 percent in october and is expected to fluctuate around 2 percent. the october reading was slightly higher than we anticipated, because of the impact of higher airfares. inflation is expected to rise temporarily above 2 percent in the coming months, reflecting the impact of weak gasoline prices a year earlier. cpi inflation should then return to target. - 9chart 5 : the service sector continues to support economic growth a. contribution to annualized growth in gdp by industry % percentage points - 2 - 2 2017q1 2017q3 2018q1 2018q3 2019q1 services ( right scale ) construction ( right scale ) manufacturing ( right scale ) oil and gas extraction and supporting activities ( right scale ) other goods industries ( right scale ) growth in real gdp by industry, quarterly, at annual rates ( left scale ) sources : statistics canada 2019q3 last observation : 2019q3 b. exports excluding energy, index : 2015q4 = 100, quarterly data index goods excluding energy sources : statistics canada and bank of canada calculations services last observation : 2019q3 yesterday ’ s decision this takes us up to yesterday ’ s monetary policy decision. overall, the tone of developments in recent weeks gives us more confidence in the outlook for growth and inflation that we set out back in october. so, i and my colleagues on governing council decided that the current setting of the policy interest rate remains appropriate to keep inflation at our 2 percent target. - 10 in our discussion, we noted some initial signs that global economic growth is beginning to level off, as expected. in particular, we