tiff macklem : renewal of the monetary policy framework opening statement by mr tiff macklem, governor of the bank of canada, at the press conference on the renewal of the monetary policy framework, ottawa, ontario, 13 december 2021. * * * the objective of canada's monetary policy is to promote the economic and financial well - being of canadians. experience has shown that the best way monetary policy can achieve this goal is by maintaining a low and stable inflation environment. doing so supports a strong and inclusive labour market that provides every canadian with opportunities for a good quality of life. currently, the reopening of the global economy is associated with elevated inflation in canada and abroad. while this is a global phenomenon, it makes maintaining a sound framework for monetary policy in canada all the more important. from a longer - term perspective, since the adoption of an inflation - targeting framework 30 years ago, consumer price index ( cpi ) inflation has averaged close to 2 percent, despite periods of both upward and downward pressures on inflation. the maintenance of low, stable and predictable inflation has also contributed to canada ’ s strong labour market performance. in the current context, canada ’ s inflation - targeting framework helps to ensure that inflation will return to 2 percent over the medium term. the government of canada and the bank of canada believe that the best contribution of monetary policy to the well - being of canadians is to continue to focus on price stability. the government and the bank also agree that monetary policy should continue to support maximum sustainable employment, recognizing that maximum sustainable employment is not directly measurable and is determined largely by non - monetary factors that can change through time. further, the government and the bank agree that because well - anchored inflation expectations are critical to achieving both price stability and maximum sustainable employment, the primary objective of monetary policy is to maintain low, stable inflation over time. this renewal of canada ’ s monetary policy framework is occurring at a time when changes to the economy are complicating the task of monetary policy. the global financial crisis and covid - 19 pandemic have had a significant impact on the global economy and financial system, and major trends such as shifting demographics and new digital technologies are altering the economic landscape. climate change and the long - term transition to net - zero greenhouse gas emissions will drive structural change in the canadian and global economies. also, there is now greater recognition, supported by economic research, that when the benefits of economic growth and opportunity are more evenly shared, it leads to

real economy. i think the liquidity policy, government measures and interest rate decisions that have been taken were decisive in breaking the downward spiral in the financial sector in october. the first signs of positive effects are visible : spreads in the interbank market have come down from their peaks in october and november last year, although they still stand at historically high levels. in particular, as chart 5 shows, banks have begun to pass on the ecb ’ s interest rate cuts to bank lending rates to non - financial corporations and households. at the same time, the growth rate in the volume of loans to the private sector has fallen. we are aware that the crisis is far from over, we are aware that the effects on the real economy have only started to be felt and we also are aware that there are substantial differences between euro area countries. let me also explain why the public authorities have acted the way they did. first of all, rescuing the banking sector is no end in itself. the banking sector is of systemic importance for the whole economy. a breakdown of financial intermediation would severely damage all other sectors in the economy. historical evidence shows that banking crises can have seriously negative effects on gdp. in europe, we experienced such effects in finland and sweden in the early 1990s. 2 hence, we need a financial system that can finance investment, innovation and ideas. all measures taken aim at supporting trust in the financial system and preventing constraints on credit supply. nevertheless, i think it is also important to emphasise that there are limits to what policymakers can achieve. as unsustainable developments in certain market segments and geographical regions have partly caused the crisis, adjustments have been necessary. monetary and fiscal policies are needed to smoothen out the adjustment process and to prevent negative overshooting. at the same time it is important to maintain the confidence of the public in the long - run sustainability of public finances. 3. the way forward at the same time, the private sector and public authorities are not helplessly exposed to the forces that caused the crisis. various initiatives at national, european and international level aim to improve the financial system. of these initiatives, i would like to highlight three areas where i think change is particularly needed because they were primary causes of the current financial crisis : first, the internal risk management systems of financial institutions and compensation frameworks in general need to be aligned with requirements for sustainable development. private sector entities can shape the rules mainly within their own organisations to avoid short - termism. second