exacerbate these vulnerabilities. however, as we noted in our financial system review, financial vulnerabilities would usually translate into full - blown risks – with attendant consequences for the economy – only if there was a trigger, such as a widespread and sharp decline in economic activity and employment. the terms - oftrade shock we are experiencing, which has already translated into an increase in excess capacity and downward pressure on inflation, has the potential to act as such a trigger, if left unaddressed. accordingly, the governing council agreed that acting at this time was consistent both with the bank ’ s primary mission – the pursuit of its inflation target – as well as helping to manage financial stability risks, even if there could be some increase in financial vulnerabilities in the process. let me remind you that monetary policy operates with a long lag and there are many transmission channels through which interest rate changes affect the economy, including longer - term bond yields and the exchange rate. this needs to be taken into account when predicting how the economy will respond to our actions, and when. it also makes it difficult to pin down the precise timing when canada will reach full capacity with inflation sustainably at target – it could just as easily be sooner as later than projected. let me also remind you that there are many uncertain elements and risks to our outlook, which are discussed in the mpr. one additional element i could mention is the prospect of interest - rate liftoff in the u. s. although we have no special insight into when this might occur, we have said many times that it would be welcome, for it would be consistent with a more positive outlook for the u. s. economy. nevertheless, because the canadian economy is dealing with a large terms - of - trade shock, it is likely to be less synchronized with the u. s. economy than in the past. furthermore, we would expect any rises in global bond yields to be at least partly imported into canada – with possible implications for the canadian dollar – and with an uncertain net effect on our economy. to conclude, the canadian economy is undergoing a significant and complex adjustment, even while it is still trying to overcome persistent global headwinds. in the judgment of the governing council, today ’ s action is required to help facilitate the adjustment of the economy to this unusual situation. with that, carolyn and i would now be happy to take your questions. bis central bankers ’ speeches

in the costs of offshore producers would have allowed them to keep producing more than otherwise, and this extra supply would have weighed on commodity prices and, hence, the profits of australian resource producers. 8 see hambur j, l cockerell, c potter, p smith and m wright ( 2015 ), ‘ modelling the australian dollar ’, rba research discussion paper 2015 – 12. 9 the improved growth in non - mining activity has occurred despite non - mining business investment remaining subdued. weakness in non - mining business investment has been most evident in western australia and, to a lesser extent, queensland, where the decline in mining investment and commodity prices have contributed to weak conditions in those states more broadly. more recently, non - mining investment appears to have increased in new south wales and victoria, where economic conditions have been improving. 10 there has also been some decline in population growth, most notably in western australia. 11 see jacobs d and a rush ( 2015 ), ‘ why is wage growth so low? ’, rba bulletin, june, pp 9 – 18. 12 for a discussion of the differences between these < www. rba. gov. au / publications / smp / 2016 / aug / price - and - wage - developments. html >. measures, see : 13 see ballantyne a and s langcake ( 2016 ), ‘ why has retail inflation been so low? ’, rba bulletin, june, pp 9 – 17. 16 / 16 bis central banker's speeches