consistent with the evidence of greater competition in grocery and general merchandise stores in canada. looking forward, ongoing structural change in this sector suggests that competitive pressures are likely to remain intense for some time. however, the recent depreciation of the canadian dollar can be expected to offset at least some of the downward pressure on retail food prices. other notable retail entrants include marshalls, j. crew and nordstrom. the 2012 federal budget raised duty exemptions on goods purchased abroad. the exemption for a stay of 24 to 48 hours was increased from $ 50 to $ 200, while the exemption for a trip longer than 48 hours was increased from $ 400 to $ 800, both effective 1 june 2012. in total, in 2012, canadians placed nearly 164 million orders, valued at approximately $ 18. 9 billion. this dollar amount of spending represents only about 1. 9 per cent of nominal consumption in canada ( canadian internet use survey, statistics canada ). bis central bankers ’ speeches for non - durable goods, which include items such as personal care products, price growth has eased significantly in recent quarters, with prices outright falling in the fourth quarter of 2013 ( chart 20 ). in fact, the last time the rate of inflation for non - durable goods was lower than the current level was when walmart entered the canadian market in the mid - 1990s. overall, our expectation is that while increased competition will have a permanent effect on the level of prices, its impact on the rate of inflation will be transitory. our best judgment is that more intense competition will subtract around 0. 3 percentage points from core inflation in 2014. it is difficult to predict how long increased competition will weigh on inflation, but in our base - case projection we assume that it will continue to drive prices lower for about another year. implications for monetary policy as we just saw, subdued inflation appears to reflect a significant and persistent amount of excess supply in the economy and heightened competition in the retail sector. our best estimates of the impact of these two factors still leave some of the disinflation unexplained, but together they are not far off. with at least a partial diagnosis, it is time to consider the treatment. this is most easily demonstrated by comparing the effects of a fall in aggregate demand and an increase in competition in a very simple, stylized model of the economy. the model consists of the phillips curve previously outlined, equations linking aggregate demand to interest rates and a monetary policy rule in which the policy interest

years. inflation targeting was designed against a backdrop of high inflation, but its key features of symmetry and flexibility also give us room to manoeuvre in an environment of disinflation. we are doing our best to identify the main drivers of disinflation and are continuously assessing their impact on the economy and their persistence. there is, of course, some uncertainty about our judgments, particularly as to how long increased competition will depress inflation. i can assure you that the bank of canada will continue to monitor developments closely, whether i am there or not. thank you. s. poloz, “ monetary policy as risk management ” ( speech to the canadian club of montreal, montreal, qc, 12 december 2013 ). bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches