. because we are in a period of excess demand, we need a period of lower growth to balance things out and bring demand back in line with supply. the reduced spending that results from this rebalancing will ultimately lead to lower inflation. monetary policy works like a chain reaction or sequence of events. but that sequence takes time. both history and research tell us that changes to the bank ’ s policy rate affect different households and sectors of the economy differently and at different speeds. 1 if you ’ re making a big purchase or investment — one that requires a loan — you ’ ll feel the impact of higher rates immediately. and the sectors that are most sensitive to changes in interest rates are the ones that cool first. the housing sector is a clear example of this. most people take out a mortgage to buy a house. an increase in mortgage rates may cause us to delay a purchase or to purchase a less expensive house. this leads to a slowdown in housing activity. as housing activity slows, people tend to spend less on furniture and other housing - related goods. it takes longer for monetary policy to bring down price growth in other goods and services — especially services — because they aren ’ t directly tied to borrowing. instead, they adjust over time as overall spending moderates. let me turn now to our deliberations leading up to yesterday ’ s decision. not surprisingly, governing council discussed how the economy has evolved since july. we noted that while the canadian and global economies are showing signs of slowing, the canadian economy is clearly in excess demand. although growth in gross domestic product in the second quarter was slightly weaker than we had projected in july, consumption and business investment grew at a significant pace. labour markets are tight, and inflation is high and broadening. with short - term inflation expectations remaining high, and all three of the bank ’ s core measures of inflation moving up, governing council discussed the ongoing risk that inflation becomes entrenched. the longer inflation expectations remain high, the greater the risk that elevated inflation becomes entrenched. if that were to happen, higher inflation could become self - fulfilling, and a damaging cycle would be set in motion. we want to ensure this scenario does not materialize because if it does the economic cost of restoring price stability will be much higher. this led to our decision to raise the policy interest rate by 75 basis points to 3. 25 %. by front - loading interest rate increases now, we ’ re trying to avoid the need for

remarks by carolyn rogers senior deputy governor calgary economic development september 8, 2022 calgary, alberta economic progress report : restoring price stability good morning, everyone, and thank you for the opportunity to be here. this is my second public speech since joining the bank of canada at the end of last year, and i am really pleased to be out west this time. i grew up in western canada and over the course of my career have lived in every province from manitoba west to british columbia, including some time here in calgary. my favourite time to be out west is in the fall, during harvest. it ’ s a time of year that holds a lot of promise and brings back many fond memories for me. i ’ m looking forward to spending the next couple of days speaking with business leaders like you, hearing their perspectives on the albertan and canadian economies. but first, i ’ d like to offer you some of the bank ’ s views — particularly on the economy and monetary policy. i plan to cover three things this morning. first, i want to spend some time discussing our current view on the canadian economy and inflation, specifically. the consumer price index ( cpi ) was 7. 6 % in july, down slightly from june ’ s rate of 8. 1 %. while it looks like we might have seen the peak of overall inflation in canada, inflation excluding gasoline prices has continued to rise and broaden across goods and services. there are also some significant uncertainties, particularly in global commodity markets, that could set us back. and although most days it feels like the pandemic is behind us, we are heading into winter, and that means more time indoors. if we ’ ve learned anything over the last two years, it ’ s to expect the unexpected. of course, the second thing i want to talk about is our most recent rate decision. yesterday the bank raised the policy interest rate by 75 basis points. this came on the heels of july ’ s decision to increase the policy rate by a full percentage point. in total, the bank has increased the policy rate by 3 % since march. i ’ ll spend some time explaining why we have chosen to front - load rate increases — i would like to thank erik ens and kristina hess for their help in preparing this speech. why we think this has been the right response to the current underlying causes of inflation in canada. the third and final thing i will spend some time on is the path forward. i hope to give you a