stephen s poloz : opening statement before the standing senate committee on banking, trade and commerce opening statement by mr stephen s poloz, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ottawa, ontario, 25 april 2018. * * * good afternoon, mr. chairman and committee members. senior deputy governor wilkins and i are pleased to be back before you today to discuss the bank ’ s monetary policy report ( mpr ), which we published last week. when we were last here at the beginning of november, we saw signs that the canadian economy was moderating after an exceptionally strong first half of the year. that moderation turned out to be greater and to last a bit longer than we expected. still, it is important to recognize that inflation is on target and the economy is operating close to potential. that statement alone underscores the considerable progress seen in the economy over the past year. the slower - than - expected growth in the first quarter reflected two main issues. first, housing markets reacted to announcements of new mortgage guidelines and other policy measures by pulling forward some transactions into the fourth quarter of last year. that led to a slowdown in the first quarter that should naturally reverse. second, we saw weaker - than - expected exports during the quarter. this weakness was caused in large part by various transportation bottlenecks. some of this export weakness should also reverse as the year goes on. so, after a lacklustre start to 2018, we project a strong rebound in the second quarter. all told, we expect that the economy will grow by 2 per cent this year, and at a rate slightly above its potential over the next three years, supported by both monetary and fiscal policies. the composition of growth should shift over the period, with a decline in the contribution from household spending and a larger contribution from business investment and exports. inflation should remain somewhat above the 2 per cent target this year, boosted by temporary factors. these factors include higher gasoline prices and increases to the minimum wage in some provinces. their impact should naturally unwind over time, returning inflation to 2 per cent in 2019. of course, this outlook is subject to several important risks, and a number of key uncertainties continue to cloud the future, as was the case in november. in terms of risks to the outlook, the most important remains the prospect of a large shift toward protectionist trade polices around the globe. i should be clear that our forecast already includes

government stimulus measures. overall economic activities consequently improved, and i would like to thank all parties for their collective efforts. on the monetary policy front last year, a greater emphasis was placed on risks to growth, which justified the accommodative monetary policy stance throughout 2012. the monetary policy committee ( mpc ) lowered the policy interest rate twice by a total of 0. 50 percentage points. the first cut took place earlier in the year, and was designed to help speed up economic recovery after the severe flood. the last easing in the latter part of 2012 was intended to provide an additional cushion against the impact of global economic slowdown and to further bolster domestic demand to sustain growth momentum. these policy decisions were deemed consistent with keeping inflation within the target range, as well as maintaining the overall financial stability. in fact, the first joint meeting between the mpc and the financial institutions policy committee ( fipc ) took place last year, where the two committees shared their perspectives and information, as well as discussed in depth potential sources of systemic risk that could arise from economic and bis central bankers ’ speeches financial linkages. regarding capital flow policy and in collaboration with the ministry of finance, the bot continued to relax regulations to promote outward investment and foster more balanced capital movements. a clear lesson from the recent global financial crisis is that a good conduct of monetary policy alone does not necessarily guarantee a sound and stable financial system. as a result, central banks around the world have stepped up efforts to strengthen the supervision of financial institutions, improve risk management, and place a greater emphasis on monitoring systemic risks. last year, the bot introduced the basel iii capital regulatory framework with focus on improving capital quality, increasing capital base to provide cushion in the event of a crisis, and strengthening risk management procedures, especially in the realm of credit risks. these initiatives would further strengthen the stability of financial institutions, laying the foundation for stronger financial system and economy in the longer term. to increase the efficiency of the payment system, the bot has launched the imaged cheque clearing and archive system ( icas ), for bangkok and its vicinity since february 2012. in addition, the financial consumer protection center ( fcpc ) was set up to provide information about the bot, to receive consumers ’ complaints regarding financial services, and to offer financial education to the public, all of which have been well received. economic outlook in 2013 looking ahead, risks to growth have declined on the back of firmer, if moderate, global recovery, and robust