payroll data. it is interesting that, although central bank talk may have increased sensitivity to certain data releases, overall financial market volatility has declined recently. federal reserve communications policy has likely contributed to the fall in volatility by reducing the uncertainty surrounding the future course of policy. we concentrated on changes in the funds rate that were surprises to financial markets, on the grounds that changes in the funds rate that were fully anticipated would already be priced into markets in advance of the fomc ’ s action. to determine which fomc rate - setting actions were unexpected, as well as the magnitude of the policy surprises, we followed kuttner ( 2001 ) and compared the rate actually set by the fomc at each meeting to the market ’ s expectation of that rate, as inferred from the prices of federal funds futures contracts. applying our methodology, we found that an unexpected 25 - basis - point change in the committees funds rate target has been associated with a change of about 13 basis points, in the same direction, in the expected funds rate one year ahead. as noted in the text, however, most changes in the funds rate are at least partially anticipated, implying that the unexpected component of most funds rate decisions is considerably less than 25 basis points. the effect on year - ahead rate expectations of a typical change in the funds rate is correspondingly reduced, to 5 basis points or less. to determine which statements surprised markets we used a number of sources, including staff commentaries prepared at the board of governors and the federal reserve bank of new york, articles in the wall street journal, pre - meeting commentary by a leading financial firm, and pre - meeting surveys of primary dealers and other market participants. each fomc statement that used the “ considerable period ” language also discussed labor market conditions, and the december 2003 statement tied the “ considerable period ” outlook for policy closely to “ slack ” in resource use. as i observed earlier, much of the potency of monetary policy lies not in the fomc ’ s ability to affect today ’ s federal funds rate but rather in the committee ’ s ability to influence market expectations about future policy and, consequently, the economically more relevant long - term rates. on this important metric, the statement has become an increasingly important tool of policy. of course, as i have already emphasized, talk is of no value if market participants do not believe that the fomc intends to follow through on its plans - adjusting as necessary, of course,

mark carney : building continuous markets remarks by mr mark carney, governor of the bank of canada, to the canada - united kingdom chamber of commerce, london, england, 19 november 2008. * * * it is a pleasure to be back in the city. twenty years ago, i started my first proper job here, as a credit analyst – remember that quaint role? at an investment bank – remember those archaic institutions? i came to london then because it appeared poised to realize the promise of market - based finance and to reassume its role at the centre of global finance. today, i come to london, when so many are burying markets, to praise them and set out some thoughts on how to make them more robust. throughout the years, canada has been a major beneficiary of london's innovation. companies of adventurers, conceived and funded in london, opened up large swathes of canada to international trade. global capital, channelled through london, financed our infrastructure and commodities booms at the turn of the twentieth century. our governments leaned heavily on the euromarkets to finance their borrowings in the 1980s and early 1990s. more recently, we have looked to london for an array of new financial products. we have also given back. canada helped to finance britain's world war ii efforts, and we were pleased to receive the final repayment, on schedule, in 2006. the bank of canada's pioneering of inflation targeting was undoubtedly of some assistance to the bank of england's thinking in its adoption of this successful framework. we now may have something to contribute amidst the current maelstrom : a dispassionate and ultimately optimistic perspective on how to build sustainable markets in the age of global capital. the simple fact is that, while canadian markets have been under strain, they have remained open. our banks have not sought public capital. they continue to expand lending to both the business and household sectors without the kind of prodding seen in other jurisdictions. while we are not immune to the impact of a potentially serious global recession, we have a financial system that affords us the means, and gives us the prospect, of investing for the inevitable global recovery. for that recovery to reach its full potential, we all need a financial system with continuously open markets at its core. it is on this theme that i would like to concentrate my remarks today. markets and banks the current crisis marks the reversal of a decades - long transition of the global financial