david dodge : the bank of canada and monetary policy : future directions remarks by mr david dodge, governor of the bank of canada, to the toronto board of trade, toronto, ontario, 20 february 2001. * * * it's a pleasure to be here today, in my home town of toronto, for my first public speech as governor of the bank of canada. and i am particularly pleased to be speaking to the board of trade. one of my great delights as a boy was when my father would bring me to the dining room of the old board of trade for lunch in june, if i had done well in school that year! that was my first contact with the toronto business and financial community — a valuable contact that i have sought to maintain over the years. and it is a contact that i hope to strengthen while i am at the bank of canada. the bank is well respected both inside and outside canada for the quality of its professionals and the work that it does. i am honoured to join it and to lead it over the next seven years. my task will be to ensure that we build on the bank's record to date and that we strengthen and deepen the progress made so far in fulfilling our responsibilities to canadians. there are three main issues i want to address publicly as i begin my term : the bank's contribution to good economic performance ; the bank's contribution to promoting financial stability, both nationally and internationally ; and the importance of open and frank dialogue with business, labour, and the general public. today, i would like to focus my comments on the first and the third of those issues. i hope to address financial stability as part of my next public speech. and i will conclude with a few remarks on the current economic situation. the bank's contribution to good economic performance as the country's central bank, the bank of canada has a commitment to contribute to the economic well - being of canadians. fundamentally, this means that we must conduct monetary policy so as to promote sustained economic growth, create conditions conducive to rising investment, employment, and incomes, and encourage a more stable macroeconomic environment. how can the bank of canada foster such an outcome?... low, stable, and predictable inflation the best contribution that the bank can make to good economic performance is to preserve confidence in the future value of money. in practical terms, this means that canadians should not have to worry about the effects of inflation when they make everyday decisions as

. in fact, these trends are all the more noteworthy in that they are happening against a backdrop of persistent and strong headwinds in the global economy. the progress in the economic front is the outcome of prudent and disciplined monetary and fiscal policymaking. and these conditions are sustainable because of strong and wellgrounded policy frameworks in place. these include : 1. the government is committed to sound fiscal policy. the government is appropriately focused on strengthening the quality of fiscal adjustments. it has increased spending for critical social priorities and economic infrastructures while keeping a watchful eye on the medium - term objective of fiscal consolidation. 2. the government continues to pursue a reform agenda that is aimed at raising the economy ’ s flexibility and unlocking the country ’ s growth potential. 3. a forward - looking monetary policy framework that has helped strengthen our commitment to non - inflationary economic growth. we have met our inflation target for the past consecutive four years ( 2009 – 2012 ), even as the economy ’ s engines have powered ahead ; 4. an enhanced policy toolkit that is geared to respond to the challenges brought about by strong capital inflows ; 5. finally, supervisory and regulatory practices that are benchmarked against international best practices. this is reflected in well - capitalized and better - governed banks that are able to efficiently perform financial intermediation and risk management. there are therefore fundamental reasons to believe that continued macroeconomic discipline and reforms can push the growth trajectory further to a path that will allow the economy to not only survive the global headwinds but to adapt and to thrive in a more challenging operating environment. as we are aware of the headway that has been made, we are equally mindful of the challenges and the risks to the favorable economic outlook. i can assure you that there are a lot of “ responsible adults ” in the room. these are policymakers who are attentive to the overt as well as the underappreciated risks to the philippine growth story. what are the challenges? what are the latent pressure points in the economy? let me cite three major ones, from the bsp ’ s standpoint : 1. managing capital flow surges – an issue repeatedly mentioned this morning 2. ensuring financial stability 3. going the distance with structural reforms in this challenging period of very strong capital flows and expectations of continuing strong capital flows, or as one economist has called it the whipsaw of huge capital movements, the question is – do