therefore been the most obvious response to the crisis so far, complemented by tltros and pltros to ensure bank credit flow. last but certainly not least, regulatory constraints were also temporarily eased to allow banks to provide additional funding to firms and households that were in need. the second wave • the events of the past weeks, however, show that the virus remains among us, and that in spite of all efforts, a second wave has not been – and potential subsequent waves may not be – avoided. this second wave is hitting economies that have not yet fully recovered from the earlier blow. and there are highly indebted sectors where firms are increasingly fragile. • going forward, economic activity will likely be subject to a bumpy trajectory, until the availability of a vaccine paves the way for the recovery in output and inflation to take hold convincingly. yesterday ’ s news confirms that we can be hopeful that there will indeed be an end to this pandemic emergency, as medical solutions are being developed succesfully. error! unknown document property name. • at the same time, uncertainty will remain with respect to the widespread availability and deployment of a vaccine, which implies that the spectre of potential future containment measures may weigh onto economic activity into 2021. the outlook will be shaped by different forces, which may pull it in different directions. • on the one hand, activity has rebounded much more strongly in q3 than expected. this confirms that idle resources can resume economic activity much faster when no longer constrained by cointainment measures, which will support the medium - term inflation outlook. moreover, households and firms seem to adapt better to the pandemic and the containment measures, which arguably makes activity more resilient. • on the other hand, as the pandemic is drawn out into 2021, the financial situation of firms will become more vulnerable. this raises the risks of a financial amplification of the corona shock, with liquidity problems morphing into solvency problems that affect bank resilience. such mechanisms were very manifest during the gfc a decade ago ; any reoccurrence might therefore raise some legitimate questions about the adequacy of financial reforms implemented since. based on the december projections, we will have to come to an assessment which of these forces will more likely prevail. the policy mix • how can policymakers raise to the challenge? four main lessons can be drawn from the major crises we have lived through over the

advanced economies. greater global demand would in turn translate into higher exports for canada and rising commodity prices, which would support higher incomes and spending. • a second important external risk is a more protracted and difficult euro - area recovery. since canada ’ s direct trade links to the euro area are limited, the effects would be felt mainly through confidence and financial channels, as well as through indirect trade links. • we have also identified three important domestic risks. bis central bankers ’ speeches • first, there is a possibility that, for a given projection for global growth, exports could be even weaker than assumed. this is a risk that could materialize if competitiveness challenges were greater than anticipated and would result in an even larger loss of market share. • second, there is a risk on the upside that, as confidence returns, domestic momentum builds faster than expected. once the recovery in foreign demand becomes more solidly entrenched, and with domestic demand continuing to grow at a moderate pace, business sentiment could improve rapidly. • the third important domestic risk remains a disorderly unwinding of household sector imbalances, which are still elevated. the continued slowing in household credit and the rise in mortgage interest rates point to a gradual unwinding of household imbalances, but recent data suggest some risk of renewed momentum in the housing market. • although the bank considers the risks around its projected inflation path to be balanced, the fact that inflation has been persistently below target means that downside risks to inflation assume increasing importance. however, the bank must also take into consideration the risk of exacerbating already - elevated household imbalances. • weighing these considerations, the bank judges that the substantial monetary policy stimulus currently in place remains appropriate and today decided to maintain the target for the overnight rate at 1 per cent. with that, tiff and i would be pleased to take your questions. bis central bankers ’ speeches