$ 250 billion, will decline roughly in tandem. 2 qt would complement increases in the policy rate, putting upward pressure on interest rates at maturities where households and businesses typically borrow. but let me underline that our primary tool is the policy interest rate, and adjustments to the pace and timing of the removal of monetary stimulus will focus on our policy rate. this reflects several considerations. changing the policy rate to speed or slow the economy has a long history, and interest rate changes are easier to calibrate and communicate. our policy rate is a nimble tool, and we have used it to deliver low, stable and predictable inflation since the bank of canada began inflation targeting in 1991. changing the policy rate will therefore 1 see p. beaudry, “ our quantitative easing operations : looking under the hood ” ( speech delivered virtually to the greater moncton chamber of commerce, the fredericton chamber of commerce and the saint john region chamber of commerce, fredericton, moncton, saint john, december 10, 2020 ). 2 the level of settlement balances was near zero before the pandemic. for a variety of reasons, including investor preferences shifting toward safe and liquid assets, changes to the payment system in canada, and regulatory changes that encourage the greater use of central bank deposits, the appropriate level of settlement balances will likely be higher than it was before the pandemic, although still much lower than it is now. when the bank approaches that lower level, it can be expected to once again start traditional modest bond purchases to accommodate its normal course of operations. see t. macklem, “ economic progress report : monetary policy for the recovery ( speech delivered virtually to federation des chambres de commerce du quebec, montreal, september 9, 2021 ). - 9remain our most important monetary policy tool. and as we said in january, canadians should expect a rising path for interest rates. conclusion let me conclude. these are anxious times. the russian invasion of ukraine is deeply troubling and has injected new uncertainty. this comes atop continued uncertainty about the evolution of covid - 19, even as the world makes its way out of the omicron variant. supply chain disruptions also continue, distorting the price and availability of many goods. all of these issues featured prominently in our deliberations leading to yesterday ’ s decision, and we will need to manage through them. but slack in the economy is absorbed, there is solid momentum, and inflation is too high

economy and its commitment to achieving the 2 % inflation target. today i will provide an update on economic developments, with a focus on inflation and the forces behind it. i will also review the role of monetary policy in bringing inflation back to target. finally, i want to look ahead to the next phase of our balance sheet management and the mechanics of qt. like so many things that have happened during the pandemic, this will be new territory for canadians, and i want to ensure the process is clear and transparent ahead of time, so that everyone understands what comes next. economic update since january the canadian economy is robust. growth of gross domestic product in the fourth quarter was very strong at 6. 7 %, reinforcing our view that economic slack in the economy has been absorbed. and growth in the first quarter of 2022 looks more solid than previously projected. as expected, inflation has remained high. inflation control is our number one job at the bank, so i want to explain what is driving these price increases and what canadians can expect looking ahead. since last spring, consumer price index ( cpi ) inflation has surged well above our target range of 1 % to 3 %. in january, cpi inflation was 5. 1 %. the russian invasion of ukraine is driving up international prices for oil, wheat and other commodities. this will put further upward pressure on inflation in canada and around the world. setting aside the crisis in ukraine, the surge in inflation we have seen since last spring largely reflects pandemic - related shifts in global supply and demand. but this rise in inflation has been larger than we expected six months ago, and price increases have broadened. so i want to take a closer look at the forces at play. one indication of the unusual forces at play is the large gap that has opened up between different measures of core inflation. all three of our core measures have increased in recent months. cpi - common, which is more related to inflation in services and less influenced by global supply disruptions, was only 2. 3 % in january. in contrast, cpi - median and cpi - trim, which have been more influenced by the prices of globally traded goods, were 3. 3 % and 4. 0 %, respectively ( chart 1 ). - 3chart 1 : inflation measures are elevated % year - over - year percentage change, monthly data - 1 total cpi cpi - common cpi - trim sources : statistics canada and bank of canada calculations cpi - median target last