had been projected in january. while underlying inflation is subdued, a number of temporary factors will boost total cpi inflation to around 3 per cent in the second quarter of 2011 before total cpi inflation converges to the 2 per cent target by the middle of 2012. this short - term volatility reflects the impact of recent sharp increases in energy prices and the ongoing boost from changes in provincial indirect taxes. core inflation has fallen further in recent months, in part due to temporary factors. it is expected to rise gradually to 2 per cent by the middle of 2012 as excess supply in bis central bankers ’ speeches the economy is slowly absorbed, labour compensation growth stays modest, productivity recovers, and inflation expectations remain well - anchored. the persistent strength of the canadian dollar could create even greater headwinds for the canadian economy, putting additional downward pressure on inflation through weaker - than - expected net exports and larger declines in import prices. an additional downside risk to inflation in canada relates to household spending, which could be weaker than projected, given high household debt levels. on the upside, commodity prices and global inflation could rise faster than anticipated and there could be stronger - than - expected momentum in household expenditures. overall, the bank judges the risks to the canadian inflation outlook are roughly balanced over the projection horizon. reflecting all of these factors, the bank decided yesterday to maintain the target for the overnight rate at 1 per cent. this leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of material excess supply in canada. any further reduction in monetary policy stimulus would need to be carefully considered. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches

mr thiessen ’ s statement on the bank of canada ’ s monetary policy report opening statement of the governor of the bank of canada, mr gordon thiessen, before the standing committee on finance of the house of commons on 26 may 1999. it is always a pleasure to appear before your committee following the publication of our monetary policy report. we released our ninth report last wednesday. the bank of canada began publishing these reports on a semiannual basis four years ago, as part of our effort to increase the transparency and accountability of the bank ’ s conduct of monetary policy. the main focus of every monetary policy report is how well canada is doing in managing inflation. but controlling inflation is not an end in itself. the objective of monetary policy is to help create and maintain a monetary climate that favours good economic performance, an economy where growth and employment are strong and canadians feel prosperous. the bank feels strongly that the best thing that monetary policy can do to help long - term growth in the economy is to preserve low and stable inflation. indeed, i believe the low and stable inflation rate we have had in canada in recent years has helped us through some difficult times. however, i am also happy to report that the global financial system is much more stable than it was at the time of my last appearance before you six months ago. the shock from the financial crisis in southeast asia, which began almost two years ago, was compounded last august by russia ’ s default on its external debt. the turbulence that followed has now largely subsided and investor confidence is being restored. as a result, the outlook for the world economy has become more positive than it was last november. financial markets have steadied in southeast asia, and prospects are good for a gradual recovery there. in brazil the authorities have taken major steps to address their difficulties. overall, global financial markets now seem better able to assess risk. interest rate cuts by central banks in all major countries have helped restore investor confidence. most importantly for canada, the us economy has continued to outperform expectations with strong growth and, as yet, no definitive sign of inflation pressure. nonetheless, there is still a fair degree of uncertainty about the overall external environment, given the divergent performance of the major economies. japan is still in recession and europe has been slowing down. because of this, we are expecting only a slow recovery in world commodity prices this year. in canada, the recent driving force in our economy has been exports. the strong demand in