are often quickly reversed and can add considerable " noise " to total cpi, making it difficult to discern genuine movements in trend inflation. for this reason, the bank uses core inflation as an operational guide. by focusing on the more stable components, the bank can get a better fix on the underlying trend in inflation. this is important because monetary policy operates with long and variable lags, and any attempt to control short - term movements in inflation is likely to prove counterproductive, destabilizing both inflation and real economic activity. our experience in canada has shown that core inflation is a better tool for discerning inflation trends than is total cpi. indeed, when the two deviate, total cpi inflation tends to converge on core inflation rather than the reverse. when total inflation temporarily moves higher or lower than the target, households and businesses know that it will probably return to target within a relatively short time. the present situation offers a compelling example. when there is a sudden and persistent shock, as we have seen in the past few months from outside our borders, the immediate effects may be felt before the full effect of the monetary policy response kicks in. however, these monetary actions will have an impact on economic output and will bring inflation back to the target. current outlook with this background, let me turn now to the current economic climate and its implications for inflation. the outlook for the world economy has deteriorated significantly in recent months. the financial crisis intensified last autumn and spilled over into an already weak global economy. this, in turn, put further strains on the global financial system, increased uncertainty and sharply reduced the confidence of businesses. the major advanced economies, including canada, are now in recession, and emerging - market countries are increasingly affected. in response to the sudden downturn in global demand, energy prices have fallen further, and global inflationary pressures have abated rapidly. stabilization of the global financial system is a precondition for economic recovery. to that end, governments and central banks are taking bold and concerted actions. there are signs that these extraordinary measures are starting to gain traction, although more will be required and it will take some time for financial conditions to return to normal. in addition, considerable monetary and fiscal policy stimulus is being provided worldwide. as a result of these global developments, canada's economic growth is expected to decline through mid - 2009. canadian exports are already falling sharply because of the downturn in external demand, especially from the united states. here at home, demand

cross - border cooperation and information - sharing with respect to the major cross - border banking groups in the eu should be further enhanced. in particular, we consider that the cross - border arrangements between supervisors and central banks for the major eu banking groups can be further strengthened also with a view to enhancing preparedness for crisis situations. indeed, the recent financial market turbulence, whilst being correctly weathered until now, has confirmed the need for effective information sharing not only between supervisors, but also between supervisors and central banks ( without supervisory responsibilities ). this is important given the key role of central banks in ensuring the orderly functioning of money markets, promoting the smooth operation of payment systems, and contributing to safeguarding financial stability. against this background, the eurosystem strongly supports the ecofin conclusions on the eu financial stability arrangements adopted in october 2007, whereby the council invites the commission to assess possible clarifications in the legal framework for the exchange of information between supervisory authorities, central banks and finance ministries. in this respect, it is also useful to enhance the cooperation between supervisors and central banks at the operational level. in particular, the involvement of central banks in the supervisory colleges for the major eu banking groups, whenever stress situations so require, is an important aspect. another important strand of work to improve cross - border supervision relates to the further extension of the scope and depth of cebs ’ s project on “ operational networking ” in order to establish a sufficiently integrated, practical framework for day - to - day supervisory cooperation and to identify and address possible obstacles in this respect. finally, the supervisory colleges for the major eu groups should be committed to playing a pioneering role in developing enhanced processes for cross - border supervision, for example by pursuing with particular intensity measures to foster the enhanced cross - border delegation of tasks and efforts to build up a common supervisory culture. conclusions let me conclude. i share the thrust of the eurofi ’ s assessment – as expressed in the title to this session – that simply maintaining the status quo in eu regulation and supervision is not a suitable option for the way forward. instead, cross - border convergence and cooperation will need to continue to be stepped up significantly to safeguard financial stability and foster further integration and competitiveness of the european financial market. the lamfalussy framework provides the right institutional setting in this respect. the present review of the institutional framework provides a unique opportunity for introducing measures to enhance its effectiveness, from the provision of strategic guidance and impetus for the pursuit of enhanced cross - border cooperation and convergence