first expected, but not larger. meanwhile, the positive forces we had already identified continue to build and should be buttressed by our interest rate cut and the lower dollar. by the second half of the year, we expect those positive forces to dominate the picture and have us back on track to reach full capacity around the end of 2016. bis central bankers ’ speeches what are we basing this outlook on? for one thing, the january interest rate cut is working. in an atmosphere where many other central banks were also loosening policy, the reaction to the cut made financial conditions in canada significantly easier. the cut will benefit households with a mortgage, though this will be partly offset by a reduction of income for savers. let me put this in concrete terms. bank staff estimate that a household that has renewed a $ 100, 000 mortgage would save about $ 250 in interest payments this year. that ’ s on top of the roughly $ 500 that the average household will save in gasoline costs. but the really big impact is for companies with existing export contracts in u. s. dollars, which would see a bump in cash of roughly $ 15 billion to $ 20 billion over the course of the year from a threecent drop in the canadian dollar. they will also be in a stronger position to compete for new export contracts in the future. of course, i must underscore how uncertain the outlook is. in recent weeks, both oil prices and the canadian dollar have moved higher. we will need to carefully consider these and other economic and financial developments and how canadian companies and households are likely to react in the months ahead. now, let ’ s look at the categories of non - energy goods exports that we said should lead the recovery. as a whole, this group – which adds up to more than $ 185 billion – grew by almost 15 per cent in nominal terms over the 12 months through march. among industries present in p. e. i., aerospace is up by 20 per cent nationally, while machinery and equipment has risen by about 11 per cent. here in p. e. i., exports climbed by 22 per cent last year, with the total now exceeding $ 1 billion. tourism, another industry important to both p. e. i. and canada as a whole, also had a good year. foreign tourism demand grew 4. 5 per cent to reach the highest level in a decade. given lower gasoline prices and the level of the canadian dollar, we can expect further growth this

to pause and assess the impact of those moves. yesterday, we decided to leave the policy rate at its current level of 4. 50 %. we also continued our policy of quantitative tightening. it ’ s a conditional pause, though. if economic developments unfold as we projected and inflation comes down as quickly as we forecast in the january monetary policy report ( mpr ), then we shouldn ’ t need to raise rates further. but if evidence accumulates suggesting inflation may not decline in line with our forecast, we ’ re prepared to do more. looking at the data since january, governing council found a mixed picture. overall, though, things are unfolding broadly in line with our outlook. we ’ ll need to see more evidence to fully assess whether monetary policy is restrictive enough to return inflation to 2 %. for now, let me unpack recent developments and share some insight into what we discussed and how we ’ ll be thinking about things going forward. i ’ ll start with economic activity. growth in the fourth quarter of 2022 slowed more than expected, coming in flat. with consumption, government spending and net exports all increasing, the weaker - than - expected gdp was largely due to a big slowdown in inventory investment. the data did show that, in general, higher borrowing costs continue to weigh on sectors that are sensitive to interest rates, such as housing. they also showed that business investment has weakened as demand slows both in canada and abroad. we talked a lot about the labour market. job gains in canada have been surprisingly strong in recent months, and the labour market remains very tight. with weak economic growth for the next couple of quarters, however, we expect that the tightness in the labour market will ease and, as it does, pressure on wages will come down. you may remember me saying if strong wage growth isn ’ t accompanied by strong productivity growth, it will be hard to get to 2 % inflation. well, we noted that data last week showed labour productivity in canada fell for a third straight quarter, so productivity isn ’ t trending in the right direction so far. we agreed inflation is coming down largely as expected and that there has been a clear momentum shift in goods prices. but we also agreed services price 7 see p. beaudry, “ no two ways about it : why the bank is committed to getting back to 2 % ” ( speech delivered to the alberta school of business, edmonton, alberta, february 16, 2023 ). - 7