##e will no longer be necessary. we are not there yet — and that timing is a monetary policy decision that will depend on economic developments. when we get there, we will stop increasing the size of our holdings of government of canada bonds. the monetary stimulus we have injected through our balance sheet will remain, but we will no longer be incrementally adding to it. to keep our holdings of bonds relatively stable, we will need to purchase enough bonds to replace those that are maturing. essentially, we will be reinvesting the proceeds of maturities, so we call this the reinvestment phase. today, i want to update you on the evolution of the economy with a focus on developments over the summer. i will also review yesterday ’ s policy decision. finally, i want to look ahead to the shift from qe to reinvestment. in particular, i will take the opportunity to fill in some of the details of what this reinvestment phase will look like when we reach it. afterward, i look forward to taking some questions and hearing your thoughts. economic update since july 1 / 5 bis central bankers'speeches let ’ s review economic developments since the july monetary policy report ( mpr ) because it is progress toward recovery that guides adjustments to our qe purchases. globally, the economic recovery continued through the second quarter, led by strong us growth. while global economic activity is showing solid momentum heading into the third quarter, supply chain disruptions are holding things back in some goods sectors. these disruptions, and the rising number of covid - 19 cases in many regions, pose a risk to the strength of the global recovery. here at home, we expected growth to moderate in the second quarter as canadians grappled with the third wave of the virus. but the slowdown was more pronounced than we anticipated. economic activity contracted by about 1 percent. the decline in gdp reflected a sharp drop in exports, combined with a pullback in housing activity. but consumption, business investment and government spending all contributed to growth, with total domestic demand growing at more than 3 percent. growth in the second quarter was affected by disruptions to global supply chains as well as the impact of necessary public health measures. the global shortage of computer chips is affecting automobile production in many countries, including in canada. this was an important factor contributing to the decline in our exports. and it restrained consumer and business purchases of motor vehicles. shipping bottlenecks are also leading to longer delivery times

no longer be counted on to support potential output growth in the face of poor trend labour productivity. and, while canada benefits from abundant natural resources, one cannot necessarily count on commodity prices to provide the same boost to income growth in the future as they have in the recent past. here in winnipeg you have reasons for confidence, with a productive and skilled workforce, diverse industry, healthy investment in research and development, and an unemployment rate that is consistently among the lowest in canada. your province has the necessary tools to build productivity and prosperity. as we journey forward, the bank of canada will continue its efforts to understand the trends affecting canada ’ s economy and sharing what we learn with business leaders like you. we will also maintain our firm commitment to keeping inflation low, predictable, and stable. while there are many variables at play, the 2 per cent inflation target is a constant at the bank of canada, and an essential part of our role to promote the financial and economic welfare of canada. thank you very much. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches