mark carney : summary of the latest monetary policy report opening statement by mr mark carney, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 23 october 2008. * * * good morning and thank you for joining us. before i discuss today's monetary policy report, which reflects the bank of canada's latest thinking on the economy, i would like to say a few words about the global financial crisis. we realize that this has created a great deal of uncertainty and stress. we understand the severity of the situation, and we are taking action to address it. these problems originated outside of our borders, and the primary solutions to correct them must take place there as well. that is why we are working so closely with our international colleagues and why the g7 plan of action is so important. many international banks need substantial additional capital, and efforts to provide this capital are now under way in earnest. in canada, our financial system is sound, and our financial institutions are already well capitalized. we are nonetheless affected by global developments. that is why the bank of canada has taken extraordinary measures to provide liquidity. this will aid the ongoing functioning of our financial system during this time of stress, and we will continue to provide additional liquidity for our financial institutions as long as conditions warrant. it is important to remember that canadian monetary policy remains firmly focused on the bank of canada's mandate to maintain low, stable, and predictable inflation. we know through long experience that this is the best way to promote the economic and financial wellbeing of canadians. let me turn to today's monetary policy report. in it, we note that three major interrelated global developments are having a profound impact on the canadian economy and making the outlook for growth and inflation more uncertain than it was at the time of the july monetary policy report update. first, the intensification of the global financial crisis has led to severe strains in financial markets. the associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. second, the global economy appears to be heading into a mild recession, led by a u. s. economy already in recession. third, there have been sharp declines in many commodity prices. the bank expects growth to be sluggish through the first quarter of next year, then to pick up over the rest of 2009 and to accelerate to above - potential growth in 2010 supported by improving credit conditions

becoming increasingly relevant. we are an inflation - targeting central bank, and we target total cpi inflation — calculated using a basket of goods and services that represents what canadians typically buy. but parts of the overall cpi basket are sometimes highly volatile in ways not related to broader price pressures — this can be the case for gasoline and food prices. that ’ s why policy - makers like to look at what we call “ core ” inflation to gauge persistent price movements. core inflation provides a sense of the underlying trend in total cpi inflation and relates more closely to the balance between demand and supply in our economy. in practice, there are different ways to measure core inflation. traditionally, central banks in many countries have measured core inflation by excluding volatile components like food and energy. 1 the drawback of these exclusionbased measures is that the components that are volatile can change over time — something we have experienced in a big way in the last couple of years. we continue to monitor various exclusion - based measures of core inflation, but since 2016, the bank has focused on three more - statistical measures of core inflation. cpi - median and cpi - trim strip out whatever is volatile at the time. the third measure, cpi - common, is based on a statistical technique that captures the 1 cpix is an example of an exclusion - based measure of core inflation. it excludes eight volatile components of the cpi and the effects of changes in indirect taxes. the bank of canada used cpix as its primary measure of core inflation from 2001 to 2016. - 7common component in the price changes across many goods and services. this captures the idea that inflation reflects a general increase in prices. we use three measures of core inflation because no single measure is best. depending on the circumstances, one may be a better indicator of inflationary pressure, and their diversity is their strength. with inflationary pressures as strong as they are, all three measures have risen. they currently range between 4. 8 % and 5. 7 % ( chart 5 ). what they are telling us is that even after taking out components in the cpi that are volatile or don ’ t reflect generalized changes in prices, inflation is running about 5 %. that ’ s too high. we can also see that our core measures have yet to decline meaningfully even though total cpi inflation has come down in the last couple of months. going forward, we will be watching our measures of core inflation closely for clear evidence of a turning point in underlying inflation. chart 5 :