met gave me a warm handshake or a hug. i recall washing my hands very carefully afterward, so awareness was rising. life has been a blur since that day in toronto. i recall the significance of the shock really hitting me at a special meeting of major central bank governors hosted by the bank for international settlements ( bis ) on sunday, march 8. there we heard the first - hand experience of governors from china, italy and south korea. i also attended a memorial service for a friend later that day. that was my last social activity, and we were afraid to shake hands or touch the food. i will always recall my dear friend jim ’ s memorial service as the moment when the penny truly dropped. i don ’ t have time to give you a play - by - play of the next six weeks. let me just say that the work, the meetings, the videoconferences, the phone calls were relentless. there were global meetings of groups like the g7, g20, bis and international monetary fund, all at very early hours in our time zone ; bilateral calls with other central bank heads ; and domestic meetings — with the ceos of the big six banks, pension fund ceos, market regulators and other ottawa officials. and of course, many meetings with my own team, adjusting our policies and other programs in 1 / 5 bis central bankers'speeches real time. during those six weeks, the bank would cut its interest rate by a further 100 basis points to 0. 25 percent, which we consider to be the effective lower bound. we have enhanced our liquidity facilities in multiple ways. we have increased our participation in government of canada and provincial money market auctions. we have started large - scale asset purchases of canadian government bonds. we have launched programs for purchasing bankers ’ acceptances, commercial paper, provincial bonds and corporate bonds. it is useful to think of these actions along two dimensions. the first dimension is to ensure wellfunctioning financial markets. when risks rise, financial markets tend to seize up as everybody runs to cash. when this happens, the whole chain of financial intermediation can break down, and credit availability can shrink. central banks can create the needed liquidity by accumulating assets that people don ’ t want and providing the cash they wish to hold. this allows not only for a continued availability of credit, but an expansion of credit as people and firms draw liquidity. when tensions dissipate, the process reverses.

, not inflationary. that balance of forces will shift as the recovery unfolds. if we were to misjudge the balance of deflationary and inflationary forces during the recovery, the economy could pick up too much steam and inflation could rise. we are alert to this risk and have the tools to respond should it materialize. but at present we see the risk of disinflation as more immediate. it was in the context of the unknowable scope of downside risk for the economy and inflation that i coined the phrase, “ no one has ever criticized a firefighter for using too much water. ” as you can see, scenario planning has played a central role in our response to the crisis so far, and i expect that will continue. those scenarios will come into better focus as we see new data, but it will be some time before we get back to our normal forecasting environment. certainly, we will need to monitor and adjust for any structural damage judgmentally. throughout, our inflation target is the anchor to our activities. inflation targeting offers investors and households an anchor for the future. it tells people that the bank will work as hard as it can to get the economy stabilized and back on track, so as to prevent inflation from falling significantly below target for an extended period. it is that anchor and our independence from government that gives our lending programs the power to stabilize things. at present we face asymmetric risks, as the downside risks are far more dire than the upside ones. this simplifies our risk management problem for the time being. under normal circumstances, we would also be concerned with adding to financial vulnerabilities. after all, lower interest rates are intended to promote increased borrowing and therefore spending. we have not forgotten about financial vulnerabilities — we will put more weight on them in our risk management framework once we are confident that our primary objective will be met. to conclude, here are some of the lessons for central banking i take from this teachable moment : 1. use scenarios, but focus on the narrative they represent. avoid numbers when uncertainty is extreme, as they can generate a cloud of possibilities that many will struggle to understand. 2. make sure everyone understands your goals. everything you do needs to have an explicit purpose and be part of a coherent framework. 3. crisis conditions argue for vigorous, even outsized, responses because maintaining confidence is critical to the recovery ; gradualism is unlikely to succeed. 4