to this action would likely be lost if implementation were significantly delayed, as private securitization activity would likely be inhibited in the interim. implications for financial markets and monetary policy most recently, as i am sure committee members are well aware, subprime mortgage losses that triggered uncertainty about structured products more generally have reverberated in broader financial markets, raising concern about the consequences for economic activity. as i noted in a speech last month at the economic symposium hosted by the federal reserve bank of kansas city, the turbulence originated in concerns about subprime mortgages, but the resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans. these wider losses reflect, in part, a significant increase in investor uncertainty centered on the difficulty of evaluating the risks for a wide range of structured securities products, which can be opaque or have complex payoffs. investors also may have become less willing to assume risk. some increase in premiums that investors require to take risk is probably a healthy development on the whole, as these premiums have been exceptionally low for some time. however, in this episode, the shift in risk attitudes combined with greater credit risk and uncertainty about how to value those risks has created significant market stress. on the positive side of the ledger, past efforts to strengthen capital positions and financial market infrastructure places the global financial system in a relatively strong position to work through this process. in response to these developments, the federal reserve moved in early august to provide reserves to address unusual strains in money markets. on august 17, the federal reserve board announced a cut in the discount rate of 50 basis points and adjustments to the reserve banks'usual discount window practices to facilitate the provision of term financing for as long as thirty days, renewable by the borrower. the purpose of the discount window actions was to assure depositories of the ready availability of a backstop source of liquidity. the federal reserve also took a number of supplemental actions, such as cutting the fee charged for lending treasury securities. earlier this week, federal open market committee lowered its target for the federal funds rate by 50 basis points. the action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. recent developments in financial markets have increased the uncertainty surrounding the economic outlook. the committee will continue to assess the effects of these and other developments on economic prospects and will act as needed

david dodge : summary of the latest monetary policy report update opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report update, ottawa, 24 january 2008. * * * good morning. i'm pleased to be here with you today, for my final press conference as governor of the bank of canada, to discuss our january monetary policy report update. the canadian economy continues to operate above its production capacity, despite some slowing in growth and inflation in the fourth quarter of 2007. financial conditions have deteriorated since october, leading to tighter credit conditions in industrialized countries. given this, and a deeper and more prolonged decline in the u. s. housing sector, the outlook for the u. s. economy in 2008 is now significantly weaker than at the time of the october mpr. the weaker u. s. economy will lead to additional downward pressure on canada's export growth. despite tighter credit conditions, domestic demand in canada is expected to remain strong, supported by continued income growth associated with the increase in commodity prices seen since october. overall, the bank now projects that the canadian economy will expand by 1. 8 per cent in 2008 and 2. 8 per cent in 2009. this growth profile implies that the economy will move into excess supply in the second quarter of this year, and then return to balance in early 2010. inflation is projected to fall below 1 1 / 2 per cent by the middle of this year before returning to 2 per cent by the end of 2009. this reflects a price - level adjustment related to increased competitive pressures in the retail sector stemming from the level of the canadian dollar, as well as the recent reduction in the gst. excluding the impact of the gst reduction, total cpi inflation is projected to average close to the 2 per cent target throughout 2008 and 2009. of course, there are a number of upside and downside risks to the bank's base - case projection for inflation. but overall, we judge these risks to be roughly balanced. on 4 december and on 22 january, the bank lowered its target for the overnight rate by onequarter of one percentage point, bringing it to 4 per cent. further monetary stimulus is likely to be required in the near term to keep aggregate supply and demand in balance, and to return inflation to target over the medium term.