threatened quite rapidly to become a much sharper decline – or harder landing – than we had either expected or needed. and that, of course, is why we promptly changed our monetary policy stance as we did, cutting interest rates by 2 % to 5½ % in the space of five months. in doing so, we have demonstrated that the inflation target is – as we have frequently said it is – symmetrical, so that we would be at least as determined and aggressive in cutting rates if we thought we were likely to undershoot the inflation target as we had been earlier in raising rates to avoid an overshoot of the inflation target. so, where do we go from here? i would strongly advise you to regard anyone who claims to know with any great certainty where we go from here with the gravest possible suspicion. forecasting the economy is very definitely an art rather than a science – though some artists craft their work rather more carefully than others. but, for what it is worth, the monetary policy committee ’ s view – described in considerable detail in our recent quarterly inflation report, which i can make available to you for a remarkably modest fee if you care to get in touch with me afterwards – is that while we will not see much growth in the first half of this year – certainly in the internationally - exposed sectors of the economy – overall output growth will pick up on the back of stronger domestic demand as we move towards the millennium to around trend or above from the second half of next year. we can ’ t of course altogether rule out an actual downturn in total output over the next few months, though the odds are against that for the economy as a whole. and we are reasonably confident that the slowdown will be relatively mild and short - lived – certainly compared with equivalent periods in the past, for example at the beginning of the 1980 ’ s and 1990 ’ s. the good news is that we expect inflation to remain close to the government ’ s 2½ % target over the next two years, which should allow the relatively steady growth we have seen in the overall economy since 1992 to resume on a sustainable basis. within this overall picture, we are still confronted with the difficult problem of imbalance between external and domestic demand and the sectoral and regional stresses that this implies. at some point, as global economic activity begins to recover, we will again need to act to restrain the growth of domestic demand, but that is a problem for the future. given the present international economic environment,

interest rates and by the moderation in energy prices. the exact timing of the u. s. recovery, however, remains uncertain and will depend importantly on how consumer confidence evolves in that country. here in canada, the latest national accounts data, which incorporate revisions to the growth profile in the first three quarters of last year, show that the level of economic activity was not quite as high at the end of 2000 as we had estimated earlier. and, based on more recent indicators, the pace of economic expansion in the first quarter of 2001 will be slower than in the final three months of last year. we can see this clearly in the automobile industry, where there have been production cutbacks mainly in response to weaker demand and excess inventories in the united states. electronic goods and telecommunications products are two other areas where activity has slowed - although from very high levels - and where world production has been running ahead of demand. all three are high - profile sectors. so naturally they attract a lot of attention, especially in parts of canada where there is a heavy concentration of these industries. but to keep things in perspective, there is still considerable strength in a number of other areas that are important to our economy. for example, investments in the energy sector and orders in the aerospace industry here in quebec are extraordinarily strong. or take retail sales other than autos, or housing, or non - residential construction : in all those areas, and in most other service industries, the level of activity remains high. when we considered the balance of this evidence earlier this month, we concluded that there was, in the near term, room for greater monetary stimulus without putting pressure on capacity and inflation. therefore, we lowered the bank rate by 50 basis points on 6 march, bringing the total decline since january to 75 basis points. in taking this action, we also considered the uncertainties attached to the timing and extent of the expected recovery in the united states and their implications for growth of total demand in canada. the bank continues to believe that the reduction in our interest rates and rising disposable incomes, bolstered by recent tax cuts, should help to support the expansion of domestic demand in canada in the second half of the year. this additional stimulus to economic activity is consistent with keeping the core rate of inflation close to the 2 per cent midpoint of the 1 to 3 per cent inflation - control target range. as for total cpi inflation, we still expect it to move down to about 2 per