of economic activity remains largely on track with our expectations, reflecting some historical revisions to gross domestic product and a little more momentum heading into the fourth quarter than we anticipated in october. it ’ s also worth noting that stronger global demand is pushing up prices for most commodities, including oil. a second aspect of our view was that this sharp rebound would give way to a longer, slower phase of the economic recovery. we ’ ve called this the recuperation phase. and indeed, more recent data suggest this part of our view is also unfolding largely as expected. the rising incidence of covid - 19 cases across the country and the tightening of restrictions on activity in response are exacerbating this dynamic. the second wave is clearly underway, here in canada and globally. this will weigh on economic activity in the first quarter of 2021 and represents an important downside risk further out, if the situation becomes much worse. as we noted in yesterday ’ s decision, the federal government ’ s recently announced measures should help maintain household and business incomes during this second wave of the pandemic and support the recovery. - 8looking further out, the picture is more reassuring — recent positive news on vaccines represents an upside risk to the outlook, although uncertainty remains around how they will be rolled out, in canada and globally. so that sets the scene. going forward, both downside and upside risks to inflation are in play. for the bank, that means being prepared to respond in either direction. thankfully, we have the tools to do so. should things take a more persistent turn for the worse, we have a range of options at our disposal to provide additional monetary stimulus. this could include increasing the stimulus power of our qe program, or it could involve targeting specific points in the yield curve, otherwise known as yield - curve control. it could also include reassessing the effective lower bound, which would allow for the possibility of a lower — but still positive — policy rate. in theory, negative interest rates remain in the bank ’ s tool kit. but we ’ ve been clear that, barring a dramatically different set of circumstances, we don ’ t think negative rates would be productive in a canadian context. what about options for responding to the upside? the faster people get vaccinated and more people get back to work in contact - sensitive sectors, the more quickly the recovery could unfold. such an outcome would be welcome news. in that context, we may need to re -

remarks by paul beaudry deputy governor fredericton, new brunswick, moncton, new brunswick, saint john, new brunswick december 10, 2020 delivered virtually our quantitative easing operations : looking under the hood introduction good afternoon and thank you very much for the kind introduction, john. i ’ m really pleased to have the opportunity to talk with all of you today — even if we are doing so virtually and from opposite coasts. i ’ m now a resident of canada ’ s west coast, but i hold fond memories of time spent vacationing in the maritimes from my home town of quebec. as you know, the bank made the decision yesterday to maintain our target for the overnight rate at 0. 25 percent, and we ’ ll spend some time discussing that later. but first, i want to talk about some of our actions to address covid - 19 and the immense challenges this pandemic poses to the financial well - being of canadians. since the pandemic hit in march, we have taken swift and decisive actions to help canadian households and businesses bridge this short - term crisis. but we are also concerned with providing a strong foundation for longer - term recovery. in the face of the pandemic, we lowered our policy interest rate to 0. 25 percent to ensure lower borrowing costs for households and businesses. we have committed to maintaining our policy rate at the current level until our inflation objective is achieved. we also launched nearly a dozen liquidity facilities and asset purchase programs to keep markets functioning and credit flowing as well as to allow interest rate cuts to work their way through the economy. i would like to thank stephane lavoie, james macgee and jonathan witmer for their help in preparing this speech. not for publication before december 10, 2020 1 : 30 pm eastern time - 2today, i ’ ll discuss our main large - scale asset purchase program — the government of canada bond purchase program1 — in greater detail. we commonly refer to this program as quantitative easing. what ’ s important to remember about this and other programs is that they are all grounded in the same policy framework that has served canada well for years. each of our actions has been designed to return the economy toward its full capacity to support our 2 percent inflation target. with this in mind, i would like to clarify some of the mechanics of and potential misinterpretations about our quantitative easing — or qe — program. when we conduct qe, the bank purchases bonds in the secondary market that