stephen s poloz : riding the commodity cycle – resources and the canadian economy remarks by mr stephen s poloz, governor of the bank of canada, to calgary economic development, calgary, alberta, 21 september 2015. * * * i would like to thank bahattin buyuksahin, brigitte desroches, kun mo and konrad zmitrowicz for their help in preparing this speech. introduction this isn ’ t the first time that a governor of the bank of canada has come to calgary to talk about commodities. i suspect it won ’ t be the last. it ’ s an obvious discussion topic here in alberta, where resources make up more than a quarter of the economy. of course, such riches aren ’ t unique to alberta. natural resources have been a big economic story for this country since the time of european contact. today, canada is the only major exporter of natural resources among the g - 7 nations. oil is just one part of the story – we are also a major producer and exporter of coal and natural gas, base and precious metals, minerals such as potash, and agricultural and forest products. because canada has been endowed with such a wide variety of resources, we ’ ve had to learn how to deal with large swings in their prices. i don ’ t just mean the usual high degree of volatility common among many raw materials. i ’ m also referring to the long - term swings in prices that are often called “ super cycles. ” what ’ s important to remember is that these longterm swings are driven by the fundamental economic laws of supply and demand, as well as the continuous technological progress that can affect both output and consumption. the pattern is familiar. a large and persistent increase in demand leads to sustained upward pressure on resource prices over a number of years. the higher prices act as an incentive to boost supply, and companies act by, for example, investing in new capacity and finding methods to increase efficiency. while high prices can certainly spur research and development, technological progress has been a constant theme in natural resource industries. such advances uncover ways to raise output and lower production costs. and it ’ s because of this progress that inflation - adjusted commodity prices have generally been trending lower for 200 years. the investments that lead to increased output can take years, if not decades, to complete. but, over time, the higher output generated by those investments combines with stabilizing demand to bring about a period of downward pressure on prices

, and identify questions that will guide future work. it is important that we learn from our own actions, but it is also important to get other perspectives. therefore, this review will be assessed by external experts. we expect the final report to be published early next year. while this review is a significant step, it is not the final word. questions will continue to be asked that may shape if and how we use our exceptional tools in the future. these questions are particularly valuable in a world where the next crisis may look different from those in the past. conclusion to wrap up, the pandemic was a period defined by the unknowable. uncertainty was particularly high. so, the bank took a risk management approach to decision - making. we considered alternative futures and thought about the consequences of making policy errors. governing council then chose a policy course that accounted for those risks. our research into our use of exceptional tools during the pandemic suggests those policies helped lower longer - term interest rates by increasing monetary policy stimulus even after the policy rate was brought as low as possible. the unwinding of qe through qt has gone smoothly. however, it is worth remembering that we faced an unprecedented shock when we decided to use qe. the bar for us to use qe again is very high. - 11 last week, we cut the policy rate to 4. 75 %. if inflation continues to ease — and our confidence that inflation is headed sustainably to the 2 % target continues to increase — it is reasonable to expect further cuts. but we are taking our interest rate decisions one meeting at a time. it is comforting to see inflation come down. but it is alarming that it rose as much as it did. our focus now is on the lessons we can take from our pandemic experience and how those lessons will guide the future application of monetary policy. thank you for your time. i ’ m happy to take any questions.