annual rate of consumer price inflation at the 2 per cent midpoint of a 1 to 3 per cent target range. we pursue this objective by trying to keep the economy operating at full capacity ; that is, we aim for a balance between total demand and supply in the economy. simply speaking, if the demand for goods and services is pushing the canadian economy against the limits of its capacity, and if inflation is poised to rise above the target, the bank would raise its official policy interest rate. this, in turn, would push up other interest rates and help to cool off the economy. conversely, if the economy is operating below its production capacity, and inflation is poised to fall below the target, the bank would lower its target rate, to help bring down interest rates and stimulate growth. so, by maintaining low and stable inflation, monetary policy promotes greater stability in economic output, too. a flexible exchange rate is a critical part of our monetary policy framework. we do not have a target or preferred exchange rate for the canadian dollar. but it is an important relative price in our economy. a floating currency helps us to achieve our inflation target and can act as a shock absorber to cushion our economy from external shocks. how monetary policy helps the economy adjust now, let me say a few words about the economic environment in which we're conducting monetary policy. there are powerful forces at work in the global economy, including growing competition from emerging - market economies, such as china and india, and large and growing financial imbalances in the united states and asia. the growth of emerging - market economies is driving up demand for commodities, and that is pushing up world prices for oil and many non - energy commodities. meanwhile, productivity improvements in some countries and a competitive world environment are lowering the prices for some consumer goods, communications services, and computer equipment. all of these forces are causing significant movement in the exchange rates of key currencies. they have also contributed to the sharp appreciation of the canadian dollar against the u. s. dollar over the past couple of years. some of the adjustments we're now seeing in the canadian economy are in direct response to these forces. our monetary policy is helping these adjustments by aiming to support continued high levels of domestic demand. in our most recent monetary policy report, released in april, we projected that domestic demand will grow by almost 4 per cent in 2005. this will offset softer foreign demand and the weaker contribution that exports are making to economic growth this year.

securities transfer act. the efficiency of our financial markets would be improved if provincial and territorial governments would proceed with legislation to replace the current patchwork of legal rules in this area and to provide a sounder legal basis for the holding and transfer of rights in securities that are held in book - entry form. this is just one example of encouraging initiatives that are under way. at the bank of canada, we will continue to contribute to these efforts by conducting research and promoting discussion on ways to improve the functioning of our financial institutions and markets and to enhance the safety and soundness of canada's financial system. we share this research with regulators, market participants, and the public. our financial system review, published twice a year, is part of that effort. conclusion let me now conclude. as i noted at the beginning, there are powerful global economic forces at work, and economies everywhere need to adjust. businesses in ottawa, and in the rest of canada, are making adjustments to meet these challenges and to take advantage of emerging opportunities. at the bank of canada, we will continue to monitor these global forces closely and to assess their impact. we will continue to conduct monetary policy with the aim of keeping inflation close to our target and the economy operating at its full potential. we will maintain our efforts to promote a safe and efficient financial system. and, as always, we will work to enhance the confidence of canadians in the value of their money and the stability of their economy. in this way, we will do our part to facilitate the adjustments that the canadian economy is making to changes in the global economy.