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, 21 january 2015. * * * good morning. carolyn and i are delighted 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 preliminary remarks. the recent drop in oil prices of course dominates this mpr, and dominated our policy discussions. there is considerable uncertainty around the outlook for oil prices and the implications for the economy. however, every credible scenario for oil left us with a significant issue for monetary policy. we have based our analysis on an assumption for oil prices of about us $ 60 per barrel for the next two years. although this is above current levels, prices seem likely to move back above $ 60 in the medium term. the drop in oil prices is unambiguously negative for the canadian economy. canada ’ s income from oil exports will be reduced, and investment and employment in the energy sector are already being cut. there will be some offsets, but they are both partial and of uncertain timing : canadian consumers will spend less on energy, but they could save some of the windfall rather than spend it ; u. s. economic growth will be stronger, which – along with a lower canadian dollar – should boost canadian exports, but the speed of the export response is uncertain given the export capacity losses of the last decade. the bank has been projecting a natural sequence of higher non - energy exports, higher investment and higher employment, which is needed to restore balance to the canadian economy and reduce financial stability risks. this sequence is gaining traction and will be strengthened by the combination of lower oil prices, stronger u. s. growth and a lower canadian dollar. however, these encouraging developments will be masked during the first half of 2015 by the impact of lower oil prices on the energy sector. later in the year, growth in canada ’ s nonenergy economy should re - emerge as our dominant trend. but the first - half slowdown represents a material setback in the bank ’ s projected return to full employment and sustainable 2 per cent inflation. let me now give you some additional insight into our policy deliberations. based on our assumption of oil prices at $ 60 a barrel, our first projection implied that it would take until late 2017 for the economy to

could also get stronger demographic demand from immigration. or some of the increase in housing demand we saw during the pandemic — for bigger housing and in suburban locations — could persist much more than we have factored into our projection. all this might lead to stronger underlying demand growth than in our current projection, despite higher interest rates. these considerations should make it clear that we are not on a pre - set path of policy rate increases aimed at getting to a specific “ terminal ” rate. our decisions are not on autopilot. conclusion it ’ s time to wrap up. we ’ re living in extraordinary times. the doubling of commodity prices since the summer of 2020 and the reshaping of supply chains, as a result of both a pandemic and a european war, has caused enormous economic upheaval. rising inflation is causing pain to consumers in many countries. all canadians feel the cost of this high inflation. inflation at 5 % for a year — or 3 percentage points above our target — costs the average canadian an additional $ 2, 000 a year. and it is affecting more vulnerable members of society the most because prices of essential items like food and gasoline have risen sharply. this broadening of price pressures is a big concern. but this is not the 1970s all over again. growth is strong in canada, and the labour market is very tight. we have low unemployment, strong growth and, unfortunately, strong inflation. and importantly, our policy landscape is different as well. since the 1990s, we and other central banks around the world have had success with inflation targeting. in canada, inflation has been close to 2 % and relatively steady for nearly 30 years. and we are committed to bringing inflation back to target, using higher interest rates and communicating clearly along the way. thank you for listening. i ’ d be happy to take your questions. 1 1. source : employment and social development canada. 2 2. bank of canada, “ targets for reducing inflation, ” bank of canada review ( march 1991 ). 3 3. consensus economics, 6 - to - 10 - year - ahead inflation expectations. 4 4. see s. kozicki, “ a world of difference : households, the pandemic and monetary policy, ” ( speech delivered virtually to the federal reserve board of san francisco macroeconomics and monetary policy conference, san francisco, california, march 25, 2020 ). 5 / 5 bis central bankers'speeches