start with macroeconomic policies and information sharing. i ’ ll begin with a question. if there is no international macroeconomic policy coordination, how can countries determine which policies they should choose to strengthen their domestic economies and thus contribute to global growth? in answering that question, i would say that policy - makers should always look to their own economies first. promoting policies that encourage sustainable growth and financial stability in their own domestic economy is the best contribution that national authorities can make to the growth and stability of the global economy. but which policies are the right ones? the oecd, among other organizations, has been working on this question for decades. i can recall attending oecd meetings here in the 1980s, when a consensus began to take shape on a set of policies that would provide the strongest base for sustainable economic growth. these policies relate to four basic areas. first, monetary policy should be directed at keeping inflation low and stable. second, fiscal policy should take a disciplined approach to the public purse. third, structural policies should encourage economic flexibility. and fourth, countries should work towards trade liberalization. let me take a few minutes to discuss these areas, beginning with monetary policy. in canada, as in many other countries, the goal of monetary policy is to maintain the public ’ s confidence in the future value of money. we do so by working to keep inflation low, stable, and predictable. over the years, the bank of canada, like many other central banks, has struggled to find the right anchor for its monetary policy - an anchor to guide its actions and to give the public a way to measure its performance. since 1991, our monetary policy anchor has been our system of explicit inflation targeting. under this system, we aim for a 2 per cent annual rate of consumer price inflation over the medium term. this target is spelled out in a formal agreement between the bank and the government of canada. but the bank is solely responsible for the implementation of monetary policy. it ’ s important to note that we conduct our policy symmetrically around the 2 per cent target. we will lower interest rates to stimulate total demand when we see that the trend of inflation is threatening to fall below the target over the next 18 to 24 months. similarly, we will raise interest rates to dampen demand when we see that the future trend of inflation is poised to rise above the target. in this way, monetary policy acts as the primary tool for stabilizing the economy. although inflation targeting has a relatively short history

david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 14 april 2005. * * * this morning, we released our april monetary policy report. in the report, we said that the global economy has been unfolding largely as expected, and the outlook for the canadian economy is essentially unchanged from that in january's monetary policy report update. there is increasing evidence that the canadian economy is adjusting to major global developments, including the realignment of currencies and higher commodity prices. the bank expects canada's economy to grow by about 2 1 / 2 per cent in 2005 and 3 1 / 4 per cent in 2006, with growth this year and next coming primarily from strength in domestic demand. to continue to support aggregate demand, we decided to leave the target for the overnight rate unchanged at 2. 5 per cent on 12 april. the bank continues to judge that the economy is operating slightly below its production capacity, and we expect that it will move back to full capacity in the second half of 2006. core inflation is expected to return to 2 per cent around the end of 2006. based on the scenario implied by oil - price futures, total cpi inflation is projected to remain slightly above 2 per cent this year, and to move slightly below 2 per cent in the second half of 2006. in line with this outlook for growth and inflation, a reduction of monetary stimulus will be required over time. this outlook is subject to both upside and downside risks and to uncertainties. the risks include the pace of expansion in asia and the prices of oil and non - energy commodities. a further risk relates to the resolution of global current account imbalances. should these imbalances persist, the risk of a disorderly correction would grow over time. most of the uncertainties with respect to the canadian outlook relate to how the economy is adjusting to the relative price changes associated with major global developments. monetary policy continues to facilitate the adjustment process by aiming to keep inflation at the 2 per cent target and the economy operating near its production capacity.