% range. unless productivity growth surprises us with a strong increase, persistent wage growth in that range will make it difficult to achieve the 2 % inflation target. the tight labour market matters a lot for the services sector : about one - third of the price of non - shelter services reflects labour costs, compared with one - fifth in the goodsproducing sectors. corporate price - setting behaviour the bos also provides insight into corporate pricing behaviour. businesses report they are still worried about their costs and are still dealing with high demand for many goods and services. they tell us that they still expect to change prices more frequently than normal over the next 12 months. but the dynamics may be starting to change. businesses say that they expect prices will grow more slowly as commodity prices fall, supply chains improve and demand softens. they also say that they expect the size and pace of price changes to decline, which suggests their price - setting practices are gradually shifting closer to what they were before the pandemic. we will need to see 2 / 5 bis - central bankers'speeches continued progress toward normalization of corporate price - setting behaviour for inflation to get back to the 2 % target. inflation expectations the other thing we are watching closely is inflation expectations. if people believe inflation will remain high for the long term, they will pay higher prices now to avoid even higher prices later. and that only makes it easier for businesses to keep raising prices. recent surveys have shown that the inflation expectations of consumers and businesses have edged down. but our latest survey of consumer expectations indicates canadians'concern about inflation is still high even if it looks to be easing. and too many people still think cpi inflation will be higher over the next two years than we forecast it will be. long - term inflation expectations remain consistent with the 2 % target, which is a good thing. but we need to see short - term expectations coming down so that companies get back to normal price - setting behaviour and wage growth moderates. in our baseline forecast, the labour market will soften as the economy slows. wage growth will ease. businesses will revert to more normal price - setting behaviour. and near - term inflation expectations will come into line with the inflation target. but there is a risk that these adjustments will take longer or stall, and inflation will get stuck materially above the 2 % target. maintaining financial stability the biggest downside risk to our forecast is a severe global recession. a major international recession could come about in several ways.

supply in the economy, heightened competitive pressures in the retail sector, and some special factors. total cpi inflation has been restrained by low core inflation and declining mortgage interest costs, with some offset from higher gasoline prices. • both total and core inflation are expected to remain subdued in coming quarters before gradually rising to 2 per cent by mid - 2015 as the economy returns to full bis central bankers ’ speeches capacity, the special factors subside, and inflation expectations remain wellanchored. • the inflation outlook in canada is subject to upside and downside risks, which are similar to those identified in january. • the three main upside risks relate to the possibility of stronger - than - expected growth in the u. s. and global economies, a sharper - than - expected rebound in canadian exports, and renewed momentum in canadian residential investment. • the three main downside risks relate to the european crisis, more protracted weakness in business investment and exports in canada, and the possibility that growth in canadian household spending could be weaker. • overall, the bank judges that the risks are roughly balanced over the projection horizon. • reflecting all of these factors, on 17 april, the bank maintained the target for the overnight rate at 1 per cent. • with continued slack in the canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches