the first issue is inflation itself. there have been several conjectures about the apparent softness of inflation in canada and many other advanced economies. some have argued that globalization is restraining inflation. this could be due to increased imports from lower - cost countries, for example, or the effect of canadian companies participating in global supply chains. others point to the impact of digitalization on the economy. they suggest that digital technologies could lower barriers to entry in some sectors and lead to more competition. the rise of ecommerce may be changing price - setting behaviour. and digital technologies could promote innovation and higher productivity, which could create disinflationary pressure. the second issue is the degree of excess capacity in the economy. we note several signs that point to slack remaining in the labour market. for example, the participation rate of young workers is still below trend, and average hours worked are less than we would expect. with the economy now operating close to capacity, we expect to see investment by companies, together 1 / 2 bis central bankers'speeches with job creation by new and existing firms, and rising productivity. this should serve to raise the economy ’ s potential output, increasing the amount of non - inflationary growth that is possible. however, this process is highly uncertain and not at all mechanical, so we have built it into our projection in a conservative way. the third issue is the continued softness in wage growth. while employment growth has been strong in canada, wages have not kept pace. the slack in the labour market is certainly responsible, in part, for this effect, and there will be a lag between the time this slack is used up and when we see stronger wage growth. however, other factors, including globalization, may also be affecting wage dynamics. finally, the fourth issue is the elevated level of household debt and how that might affect the sensitivity of the economy to higher interest rates. bank staff have recalibrated our main economic model used for projections to capture key information about housing and debt. this work tells us that the economy is likely to respond to higher interest rates more than it did in the past. however, we will watch incoming economic data closely for evidence to support this idea. we will also look to see how the household sector is responding to the new rules about mortgage underwriting. we also outline several other risks in the mpr. taken together, these give us a balanced outlook for inflation. we have not incorporated into our projection the risk of a significant shift toward more

level too. one such initiative could be to look at the possibility of using ifrs data for market, corporate law, prudential and tax purposes. convergence of reporting requirements so, having common regulatory standards and approaches on an international basis can provide a natural basis for more efficient information flows. however, without convergence of the reporting requirements that stem from these standards and approaches, entities will still have to produce and transmit different information, in different formats, to the regulators in the countries in which they are present. in other words, common regulation does not automatically translate into common reporting requirements - the second element that i want to mention today. this has been highlighted as a particular issue in the european union context, given the political objective to promote a fully integrated financial market. differences in reporting requirements can be seen as a barrier to achieving the full potential of this “ single ” market, to the extent that they impose an additional cost on those entities operating, or planning to operate, across borders. not surprisingly, therefore, there have been a number of calls for regulators to work together to streamline the reporting requirements that apply to institutions which are active on a pan - european basis. the committee of european banking supervisors, or “ cebs ”, established two years ago and charged with promoting convergence of supervisory practices and cooperation and information sharing between supervisors, has risen to this challenge and has taken a major initiative in this respect, culminating in the publication of two sets of common reporting templates, one set for institutions to report their solvency ratio results under basel ii, and the other set for institutions to report financial information based on ifrs. these two projects take advantage of the two initiatives for convergence in international regulatory requirements i have already mentioned. indeed, it would have been very difficult, if not impossible, to have made progress without them. both the introduction of international financial reporting standards and the implementation of basel ii are obliging supervisors to modify their existing reporting requirements and systems. this presents a window of opportunity to make progress on more convergent approaches. the benefits of a common reporting framework are clear, both for the institutions generating the information and for banking supervisors. from the standpoint of financial institutions, administrative costs will decrease, particularly for cross - border banks. at the same time, supervisors will benefit from easier exchange of information. and the framework offers the flexibility to incorporate future modifications with lower costs. overall, these positive effects should lead to higher quality in the information flows generated. i should say at this point that