mark carney : bank of canada ’ s economic overview and monetary policy stance opening statement by mr mark carney, governor of the bank of canada, at the house of commons standing committee on finance, ottawa, 27 october 2009. * * * good morning, mr. chairman and committee members. paul and i are pleased to appear before this committee today to discuss the bank of canada's views on the economy and our monetary policy stance. while conditions in the canadian economy have improved since we met with you in february and april, many of the basic challenges remain. before paul and i take your questions, i would like to give you some of the highlights from our latest monetary policy report, released last week. • recent indicators point to the start of a global recovery. economic and financial developments have been somewhat more favourable than the bank had expected in july, although significant fragilities remain. • in canada, as expected, a recovery in economic activity is also under way, following three consecutive quarters of sharp contraction. this resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence. • however, heightened volatility and persistent strength in the canadian dollar are working to slow growth and subdue inflation pressures. the current strength in the dollar is expected, over time, to more than fully offset the favourable developments since july. • given all these factors, the bank now projects that, relative to our july monetary policy report, the composition of aggregate demand will shift further towards final domestic demand and away from net exports. • we now expect growth to average slightly lower over the balance of the projection period. the bank projects that the canadian economy will contract by 2. 4 per cent this year and then grow by 3. 0 per cent in 2010 and 3. 3 per cent in 2011. this projected recovery will be somewhat more modest than the average of previous cycles. • total cpi inflation declined to a trough of - 0. 9 per cent in the third quarter, reflecting large year - on - year drops in energy prices. • total cpi inflation should rise to 1. 0 per cent this quarter, while the core rate of inflation is projected to reach its trough of 1. 4 per cent during the same period. • owing to the substantial excess supply that has emerged in the economy, the bank expects both core and total inflation to return to the 2 per cent target in the third quarter of 2011, one quarter

not appear to have spread more broadly. there is evidence that a significant portion of the adjustment in the automotive sector has already taken place, while the adjustment in the housing sector continues. overall, we judge that the risks to our inflation outlook in canada are roughly balanced. however, there remains a possibility of a disorderly resolution of global imbalances. on 6 march, we left our key policy interest rate unchanged at 4 1 / 4 per cent. in line with our outlook, the current level of the target for the overnight rate is judged, at this time, to be consistent with achieving the inflation target over the medium term. conclusion i've discussed some of what i see as the major challenges that we all face. i've also emphasized the crucial need for flexibility on all of our parts : government, labour, and business. this flexibility is vitally important. it will enable all of us to successfully capitalize on the opportunities presented by an expanding global economy. i'd now be happy to answer your questions.