monetary policy responses to a bubble the first is monetary policy responses to a bubble. that issue is often debated simply as whether monetary policy should lean against the wind or excessive asset price increases. however, i believe that such a way of addressing the issue just confuses the discussion. no central banker believes that a bubble can or should be prevented by monetary policy alone. a more proper way of addressing the issue would be “ how should monetary policy be conducted in an environment in which all the symptoms of the economy except for inflation signal a need for policy tightening : asset prices are rising, credit and leverage are increasing, maturity mismatch is widening, and the economy is being overheated, while only inflation remains low and stable? ” my answer is that monetary policy responses are needed anyway, and it is just semantic whether to call them extra operations. i should hasten to add that the build - up of excesses, of course, cannot be contained by monetary policy alone, and needs to be addressed by a combination of policy measures. that leads me to the second issue of the role of policy measures other than monetary policy. two objectives and two instruments? it is often argued that achieving the two objectives, price stability and financial system stability, requires two policy instruments. active discussions are continuing regarding the need for developing prudential policy measures, including the countercyclical implementation of minimum capital adequacy requirements. i completely agree with the necessity of developing prudential policy measures. having said that, i am wondering whether it is valid to employ the tinbergen principle in this context. the two objectives are not independent but closely connected with each other. it does appear that an intra - temporal trade - off exists between current price stability and current financial system stability. however, a real trade - off does exist in an inter - temporal direction between the current economic stability and the future economic stability. if that is the case, financial system stability and price stability are not independent objectives, but just differ in the time - horizon. i should say that central banks need one large toolkit to achieve one large policy objective, rather than need two policy instruments for the two objectives. versatility of regulation the third is regulatory and supervisory issues at a micro level. among various issues for discussion, i will focus on the versatility of the regulation to fit a variety of financial institutions. on the one hand, heterogeneity in financial institutions is quite important in enhancing the robustness of the financial

tiff macklem : monetary policy decision opening statement by mr tiff macklem, governor of the bank of canada and ms carolyn rogers, senior deputy governor of the bank of canada, at the press conference following the monetary policy decision, ottawa, ontario, 11 december 2024. * * * good morning. i'm pleased to be here with senior deputy governor carolyn rogers to discuss our policy decision. today, we lowered the policy interest rates by 50 basis points. this is our fifth consecutive decrease since june and brings our policy rate to 3¼ %. monetary policy has worked to bring inflation back to the 2 % target. our policy focus now is to keep inflation close to target. let me outline what we're seeing in the economy, and how that played into our decision. in the united states, the economy continues to show broad - based strength and inflation has been holding steady. the us dollar has appreciated against most other currencies, including the canadian dollar. canada's economy grew by 1 % in the third quarter, which was slower than we expected. recent data also suggest growth will be lower than projected in the final quarter of this year. growth in the third quarter was pulled down by business investment, inventories and exports. but consumer spending and housing activity both picked up, as lower interest rates started to boost household spending. canada's job market is still softening. businesses have continued hiring, but the number of people looking for work has been increasing faster than the number of jobs. the unemployment rate rose to 6. 8 % in november. it has been especially hard for young people and newcomers to canada to find work. a number of policy measures have been announced that will affect the outlook for growth and inflation in the months ahead. the most significant of these is reduced immigration targets, which suggest gdp growth next year will be lower than we forecast in october. the effects of lower population growth on the inflation outlook will likely be more muted because reduced immigration dampens both demand and supply in the economy. we'll have more to say on this when we release our next forecast in january. other federal and provincial government policies - including a temporary gst break on some consumer products, one - time payments to individuals, and changes to mortgage rules - will likely affect the dynamics of household spending and inflation in the months ahead. again, we will have more to say on this in january. as always, we will look through effects that are temporary and focus on underlying trends